State of the Automotive Finance Market

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State of the Automotive Finance Market A look at loans and leases in Q4 2016 Presented by: Melinda Zabritski Sr. Director, Financial Solutions www.

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1 State of the Automotive Finance Market A look at loans and leases in Q Presented by: Melinda Zabritski Sr. Director, Financial Solutions Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public.

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

4 Billions Loan balances break record highs while Credit Unions experience largest YOY growth (loans regardless of origination period) Total open automotive loan balance Total open automotive loan balance $1,200 $1,000 $800 $600 $400 $886 $987 $1,072 $250 $200 $150 $100 $50 $73 $60 $33 $29 $36 $42 $79 $39 $47 $200 $ Q4 $0 $43 $46 $ Q4 All Banks Captive Auto Credit Union Finance Source: Experian-Oliver Wyman Market Intelligence Reports 4 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

5 Majority of loan balances remain prime or higher with modest growth in high risk segments Loan balance risk distribution Year-over-year balance change 14.57% 35.16% 35.30% 35.30% 27.75% 27.23% 26.93% 8.62% 6.57% 6.15% 7.34% 18.06% 18.03% 17.90% 15.58% 15.77% 15.96% 3.45% 3.66% 3.91% 2014 Q4 Deep Subprime Subprime Nonprime Prime Super Prime Deep subprime Subprime Nonprime Prime Super prime Source: Experian-Oliver Wyman Market Intelligence Reports 5 Experian

6 30 day delinquency is flat with slight increase in at-risk dollars (loans and leases regardless of origination period) Source: Experian-Oliver Wyman Market Intelligence Reports 6 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

7 30-day delinquency balances by state (loans regardless of origination period) 1.42% HI = 1.99% Source: Experian-Oliver Wyman Market Intelligence Reports 7 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

8 60 day delinquency growth across all lender types (loans and leases regardless of origination period) Source: Experian-Oliver Wyman Market Intelligence Reports 8 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

9 60-day delinquency balances by state (loans and leases regardless of origination period) 0.43% HI = 0.54% Source: Experian-Oliver Wyman Market Intelligence Reports 9 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

10 Originations in Q Trends in automotive loan and lease originations 10 Experian

2% % of all new vehicles that are leased 28.87% 28.94% 54.7% 53.

11 Automotive financing: snapshot of how and what consumers are financing Percentage of vehicles with financing New Used 85.9% 85.2% % of all new vehicles that are leased 28.87% 28.94% 54.7% 53.5% Finance Market: new v used units New Used Used % of lease market 53.14% 53.62% 46.86% 46.38% 3.76% 3.97% 11 Experian

12 6.3% 6.0% 12.3% 18.0% 13.5% 36.6% 35.0% 11.9% 11.1% 7.6% 8.0% 19.1% 25.0% 25.4% 18.9% 20.5% 27.8% 35.6% 32.9% 28.4% 34.6% 30.6% 0.2% 0.1% 50.0% 52.0% 10.2% 11.9% 5.1% 5.4% Credit Unions and Captives pick up market share across the board (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 12 Experian

13 Credit scores increase across all transaction types 734 Average new credit scores Average used credit scores All New New Lease New Loan All Used Franchise Used Independent Used Q Q Q Q Q Q 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 Total finance market (loan & lease) becomes increasingly more prime across all, new and used financing Total (new & used units) risk distribution New risk distribution 27.20% 27.98% 18.66% 19.40% 39.20% 40.01% 20.09% 19.77% 18.70% 17.62% 3.35% 3.20% 44.64% 44.74% 17.69% 9.76% 17.12% 9.43% Used risk distribution 11.10% 11.90% 34.39% 35.86% 22.21% 22.09% 26.61% 5.69% 24.79% 5.36% 15 Experian Deep Subprime Subprime Nonprime Prime Super Prime

Leasing remains very prime as more consumers across all risk tiers choose to lease (loans not included) New lease risk distribution % of new borrowers choosing to lease 26.18% 28.

16 Leasing remains very prime as more consumers across all risk tiers choose to lease (loans not included) New lease risk distribution % of new borrowers choosing to lease 26.18% 28.15% Prime % 32.7% 47.82% 48.12% Nonprime 31.6% 31.7% 17.68% 16.32% 7.78% 6.93% Deep Subprime Subprime Nonprime Prime Super Prime Deep & Sub 24.2% 25.2% Q Q Experian

17 Despite more prime consumers shifting to leasing the loan market becomes more prime Total (new & used units) loan risk distribution New loan risk distribution 27.68% 27.89% 17.35% 17.81% 37.71% 38.54% 20.54% 20.43% 20.60% 19.56% 3.80% 3.66% Deep Subprime Subprime Nonprime Prime Super Prime 43.15% 43.06% 17.69% 17.52% 10.70% 10.67% Used loan risk distribution 11.07% 11.85% 34.41% 35.87% 22.28% 22.15% 26.61% 24.81% 5.63% 5.32% 17 Experian

18 39.70% 41.85% 92.21% 80.37% 67.46% 56.77% 91.27% 79.75% 68.17% 58.52% Prime and Super Prime borrowers choose used vehicles at an increasing rate resulting in shifts among all dealer types Percentage of consumers by risk tier choosing used loans Used Franchise loan risk distribution 13.88% 14.70% 41.34% 42.44% 23.81% 23.38% 18.97% 17.56% Deep Subprime Subprime Nonprime Prime Super Prime Used Independent loan risk distribution 5.52% 22.85% 6.28% 24.92% 20.77% 21.09% Deep Subprime Subprime Nonprime Prime Super Prime 39.49% 36.91% 11.37% 10.80% Deep Subprime Subprime Nonprime Prime Super Prime 18 Experian

19 $18,850 $19,329 $20,641 $21,225 $16,092 $16,765 $14,633 $16,631 $13,679 $16,430 $18,545 $14,635 $29,551 $19,103 $20,958 $16,604 $30,621 $25,100 $20,748 $22,052 $18,579 $20,221 $21,190 $18,534 $28,082 $27,696 $31,422 $31,502 Average loan amounts reach record highs Average loan amount Average loan amount by tier Avg new loan amount Avg used loan amount Avg Franchise used loan amount Avg Independent used loan amount Deep Subprime Subprime Nonprime Prime Super Prime Avg New All Used Franchise used Independent used 19 Experian

37.60 37.44 37.16 36.58 35.76 72.07 72.47 72.53 69.59 62.

loans Average new term Avg new term by risk tier New loan New lease 67

20 New loan term at 68 months with higher terms on the higher risk new loans Average new term Avg new term by risk tier New loan New lease New loan New lease Deep Subprime Subprime Nonprime Prime Super Prime 20 Experian

21 Used terms rise as more prime consumers, who have longer terms, choose used vehicles Average used term Average term by risk tier Franchise used Independent used All used Deep Subprime Subprime Nonprime Prime Super Prime Franchise used Independent used All used 21 Experian

22 Average scores by term rise lease is not included Average new score by loan term Average used score by loan term Experian

23 Longer term loans continue to dominate the market Percentage of new loans by term Percentage of used loans by term 42.0% 40.3% 41.1% 41.1% 20.8% 18.7% 29.0% 32.1% 23.6% 23.6% 16.4% 18.2% Experian

24 $435 $431 $419 $413 $411 $504 $521 $525 $511 $484 New payments reach record highs while leasing offers lower payments Average new payment Avg new payment by risk tier New loan New lease $493 $506 $412 $414 New loan New lease Deep Subprime Subprime Nonprime Prime Super Prime 24 Experian

25 $387 $385 $392 $375 $348 $336 $337 $380 $378 $383 $364 $375 $357 $374 $360 Average used payments also climb Average used payment Average payment by risk tier $374 $380 $347 $353 $359 $364 Franchise used Independent used All used Deep Subprime Subprime Nonprime Prime Super Prime Franchise used Independent used All used 25 Experian

26 4.63% 4.74% 8.78% 8.50% 7.57% 7.37% 6.42% 9.49% 8.78% 11.26% 3.60% 5.09% 4.89% 5.78% 2.63% 3.39% 3.35% 3.45% 11.81% 11.23% 13.59% 19.03% 17.62% 20.16% 10.71% 15.70% 14.19% 17.60% Average new rate rises while prime shift to used and overall higher scores results in lower rates in the used market Average rates Average rates by tier Avg new rate Avg used rate Franchise used rate Independent used rate Deep Subprime Subprime Nonprime Prime Super Prime Avg New All Used Franchise used Independent used 26 Experian

27 Summary Portfolio balances reach record levels as loan amounts grow to all-time highs Increases in both 30 & 60-day delinquency rates Leasing drops below 30% of all new consumer vehicle sales as consumers across all risk tiers increasingly choose to lease Originations across all finance types become increasingly more prime and credit scores improve Prime consumers also increasing choosing used vehicles resulting in score increases, greater percentages of used financing in the prime risk tier and lower average used rates Loan amounts and some payments reach record highs while terms continue to extend 27 Experian

State of the Automotive Finance Market A look at loans and leases in Q1 2016

State of the Automotive Finance Market A look at loans and leases in Q1 2016 Presented by: Melinda Zabritski Sr. Director, Financial Solutions www.experian.com/automotive 2016 Experian Information Solutions,