State of the Automotive Finance Market

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Phyllis Martin
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1 State of the Automotive Finance Market Presented by: Melinda Zabritski Q Experian

2 Session overview Market Overview Outstanding balances Total risk distributions Delinquency Originations New and Used financing Lender and transaction types Loan & lease characteristics 2 Experian

3 Overall Automotive Finance Market A review of all open automotive loans & leases 3 Experian

Billions Billions Loan balances reach another record high with growth across all lender types; Credit Unions maintain double-digit growth Total open automotive loan balance Total open automotive loan

4 Billions Billions Loan balances reach another record high with growth across all lender types; Credit Unions maintain double-digit growth Total open automotive loan balance Total open automotive loan balance $1,200 $1,180 $1,160 $1,140 $1,120 $1,100 $1,080 $1,060 $1,040 $1, % $1, % $1, % $1,400 $1,200 $1,000 $800 $600 $400 $200 $189.3 $201.7 $179.0 $276.8 $313.0 $346.3 $252.0 $258.5 $262.1 $364.3 $368.3 $368.2 $1,020 $1, Q4 $ Q4 Banks Captive Credit Union Finance 4 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

5 Percentage of subprime remains below 20% of loan balances with increased balances across all risk segments Loan balance risk distribution Year-over-year balance change 18.72% 19.17% 19.62% 6.04% 6.81% 41.64% 42.00% 42.19% 4.84% 19.25% 18.96% 18.50% 16.41% 16.11% 15.86% 3.98% 3.77% 3.83% 2016 Q4 Deep Subprime Subprime Nonprime Prime Super Prime Deep subprime 2.75% 1.86% Subprime Nonprime Prime Super prime 5 Experian

6 Millions Millions 2.7 million out of 89 million active automotive loans and leases are either 30 or 60 days delinquent Number of open automotive loans and leases Number of automotive loans and leases that are 30 or 60 DPD % +6.23% % +3% Q % 2016 Q4 30 DPD 60 DPD +1.08% 6 Experian

7 30 day delinquency rates improve for all but banks % of loans & leases 30 dpd 2017 Q Q4 4.48% 4.06% 1.82% 2.00% 2.39% 2.38% 1.34% 1.28% 2.36% 2.32% Bank Captive Credit Union Finance Total % of loan balances 30 dpd 2017 Q Q4 5.12% 4.63% 2.92% 2.89% 2.39% 2.34% 1.66% 1.85% 1.17% 1.10% Bank Captive Credit Union Finance Total 7 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

8 Percentage of loan balances 30 dpd AK = 1.26% HI = 2.03% 8 Experian

9 60 day delinquency up YOY with improvements in Credit Unions and Finance Companies % of loans & leases 60 dpd 2017 Q Q4 1.73% 1.65% 0.61% 0.75% 0.61% 0.62% 0.34% 0.33% 0.76% 0.78% Banks Captive Credit Union Finance Total % of loan balances 60 dpd 2017 Q Q4 1.97% 1.87% 0.56% 0.70% 0.71% 0.73% 0.27% 0.26% 0.75% 0.78% Bank Captive Credit Union Finance Total 9 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

10 Percentage of loan balances 60 dpd AK = 0.49% HI = 0.57% 10 Experian

11 Originations in Q Trends in automotive loan and lease originations 11 Experian

Automotive financing 1 : snapshot of how and what consumers are financing Percentage of vehicles with financing New Used 85.1% 85.1% % of all 2 new vehicles that are leased 28.28% 28.76% 53.8% 53.

12 Automotive financing 1 : snapshot of how and what consumers are financing Percentage of vehicles with financing New Used 85.1% 85.1% % of all 2 new vehicles that are leased 28.28% 28.76% 53.8% 53.6% Finance Market: new v used units New Used 52.61% 53.56% 47.39% 46.44% Used % of lease market 4.06% 4.35% 1 Financing = either a loan or lease is present on the title; 2 All = loan, lease or cash 12 Experian

3% Market share shifting away from banks (loan and lease units combined) Market Share of Total Financing (new/used units &

13 6.4% 6.1% 10.4% 11.2% 34.8% 34.8% 12.4% 11.6% 8.6% 8.7% 15.8% 16.6% 21.1% 21.3% 28.4% 28.4% 32.2% 30.7% 29.9% 30.6% 29.4% 26.2% 0.1% 0.1% 52.4% 54.7% 13.4% 13.6% 4.7% 5.3% Market share shifting away from banks (loan and lease units combined) Market Share of Total Financing (new/used units & loan/lease) Market Share of New Financing Bank BHPH Captive Credit Union Finance Co Market Share of Used Financing Bank BHPH Captive Credit Union Finance Co Bank BHPH Captive Credit Union Finance Co 13 Experian

14 Score range refresh Note: ranges above are those used by Experian Automotive for automotive finance market analysis and trending purposes. Other industries and lenders may use other ranges based on unique scores, portfolio and industry trends. 14 Experian

15 Credit scores show year-over-year improvement Average new credit scores Average used credit scores New lease All new New loan Q Q Q Franchise used All used Independent used Q Q Q Experian

16 Overall modest shifts in total financing while used reached record lows in subprime Total (loan & lease/new & used units) risk distribution 19.89% 20.54% 40.68% 40.63% 19.64% 19.20% 16.93% 16.75% 2.86% 2.89% Deep Subprime Subprime Nonprime Prime Super Prime New (loan/lease) risk distribution 28.58% 29.60% 45.22% 44.61% 16.83% 8.77% 16.25% 8.85% Used (loan/lease) risk distribution 11.97% 12.61% 36.55% 37.13% 22.20% 21.78% 24.37% 23.66% 4.92% 4.82% 16 Experian

17 Subprime hits a Q4 low for total and used loans; super prime grows across both new and used lending Total (new & used units) loan risk distribution New loan risk distribution 28.33% 29.49% 18.22% 18.88% 39.31% 39.31% 20.39% 19.92% 18.82% 18.58% 3.27% 3.30% Deep Subprime Subprime Nonprime Prime Super Prime 43.72% 42.97% 17.36% 9.89% 16.70% 10.05% Used loan risk distribution 11.90% 12.55% 36.55% 37.13% 22.27% 21.85% 24.39% 4.88% 23.67% 4.79% 17 Experian

18 40.23% 41.64% 91.92% 79.80% 67.27% 57.25% 90.94% 79.79% 68.68% 59.16% Continued trend of prime consumers choosing used vehicles Percentage of consumers by risk tier choosing used loans Used Franchise loan risk distribution 15.13% 15.48% 43.58% 43.52% 23.22% 22.73% 16.42% 16.48% Deep Subprime Subprime Nonprime Prime Super Prime Deep Subprime Subprime Nonprime Prime Super Prime Used Independent loan risk distribution 6.50% 6.84% 25.71% 26.33% 21.23% 21.10% 36.76% 35.94% 9.81% 9.78% Deep Subprime Subprime Nonprime Prime Super Prime 18 Experian

Leasing shifts into more prime segments as consumers choose leasing at greater rates than 2017 New lease risk distribution % of new borrowers choosing to lease 29.09% 29.82% Prime + 34.

19 Leasing shifts into more prime segments as consumers choose leasing at greater rates than 2017 New lease risk distribution % of new borrowers choosing to lease 29.09% 29.82% Prime % 33.8% 48.37% 48.03% Nonprime 30.6% 30.0% 15.71% 15.32% 6.40% 6.37% Q Q Deep Subprime Subprime Nonprime Prime Super Prime Deep & Sub 23.2% 23.4% Q Q Experian

20 CUVs and Trucks comprise the majority of the top leased models with average lease savings of $138 Top 10 new leased models by market share 3.8% 3.2% 2.9% 2.5% 2.4% 2.4% 2.3% 2.3% 1.9% 1.9% EQUINOX RAV4 CIVIC GRAND CHEROKEE ROGUE 1500 F150 ACCORD CHEROKEE ESCAPE Loan v lease monthly payment comparison on top leased models Loan payment Lease payment $445 $459 $420 $304 $346 $314 $604 $463 $465 $346 $650 $652 $441 $450 $485 $492 $376 $434 $357 $329 EQUINOX RAV4 CIVIC GRAND CHEROKEE ROGUE 1500 F150 ACCORD CHEROKEE ESCAPE 20 Experian

21 Leasing payments also rise while terms remain at 36 months Average new lease payment $460 $471 $471 $447 $435 $456 $447 $442 $448 $428 $426 $430 Deep Subprime Subprime Nonprime Prime Super Prime Total Average new lease term Deep Subprime Subprime Nonprime Prime Super Prime Total 21 Experian

22 $26,420 $15,605 $17,586 $14,623 $29,405 $17,206 $19,342 $15,426 $33,130 $19,792 $33,518 $29,120 $21,709 $17,235 $21,559 $22,933 $19,307 $21,051 $22,029 $19,376 $31,722 $20,077 $21,867 $17,468 Record highs for average loan amounts; average used loans surpass $20k Average loan amount by tier Avg New All Used Franchise used Independent used Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change in balance $888 $911 $742 $802 $767 $768 $792 $601 $648 $495 $525 $445 $382 $397 $421 $446 $390$396$385$342 $623 $488$492$466 Deep Subprime Subprime Nonprime Prime Super Prime Total 22 Experian

23 New loan term decreases; used terms increase Average loan term by tier New All Used Franchise used Independent used Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change in used loan term Deep Subprime Subprime Nonprime Prime Super Prime Total Experian

24 Longer term loans continue to dominate the market however new loans saw growth in shorter terms Percentage of new loans by term 44.0% 40.3% 30.0% 30.3% 18.5% 20.6% 1.0% 1.0% Percentage of used loans by term 41.8% 42.3% 23.8% 23.2% 17.9% 18.4% 10.0% 9.7% Average new score by loan term Average used score by loan term Experian

25 Payments hit highs; franchise used surpass $400 Average monthly payment by risk tier New All used Franchise used Independent used $544 $559 $564 $552 $517 $545 $407 $417 $408 $403 $420 $397 $388 $409 $370 $379 $397 $354 $379 $394 $354 $387 $403 $373 Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change in payments $35 $33 $30 $31 $29 $30 $24 $24 $18 $20 $17 $17 $14 $15 $16 $15 $15 $16 $13 $14 $14 $10 $18 $13 Deep Subprime Subprime Nonprime Prime Super Prime Total 25 Experian

26 Gap between new and franchise used payments widen Gap between new and used payments Gap between new and used Gap between new and Franchise used $137 $156 $126 $139 $176 $173 $155 $155 $138 $124 $158 $142 Deep Subprime Subprime Nonprime Prime Super Prime Total YOY change in payment gap $18 $11 $15 $13 $9 $10 $16 $15 $14 $14 $14 $12 Deep Subprime Subprime Nonprime Prime Super Prime Total 26 Experian

27 14.88% 12.17% 19.62% 18.55% 20.56% 16.78% 15.62% 18.33% 7.91% 5.01% 6.38% 4.19% 4.69% 6.13% 10.91% 10.29% 6.24% 6.99% 4.69% 4.74% 12.61% 9.59% 8.64% 12.06% New rates pass 6% for the first time in 10 years Average loan rates by tier Avg New All Used Franchise used Independent used Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change (bps) in loan rate Deep Subprime Subprime Nonprime Prime Super Prime Total 27 Experian

Summary Q4 continues a series of record highs for loan balances with all lenders experiencing growth 30 day delinquency improves YOY; 60 day sees increases Overall delinquency trending upward due to

28 Summary Q4 continues a series of record highs for loan balances with all lenders experiencing growth 30 day delinquency improves YOY; 60 day sees increases Overall delinquency trending upward due to prior subprime originations Leasing continues to be a highly sought product with growth in prime segments Credit scores increase with majority of growth in super prime segments Loan amounts hit record highs with monthly payments reaching highs driven by rate increases 28 Experian

State of the Automotive Finance Market

State of the Automotive Finance Market Presented by: Melinda Zabritski Q3 2018 1 Experian Session overview Market Overview Outstanding balances Total risk distributions Delinquency Originations New and