State of the Automotive Finance Market

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State of the Automotive Finance Market A look at loans and leases in Q3 2017

experian.com/automotive 2016 Experian Information Solutions, Inc.

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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 Billions Loan balances reach another record high-yet experience slowing growth; Credit Unions see highest growth Total open automotive loan balance Total open automotive loan balance 1,150 1,100 1,050 1, ,055 1,121 $1,200 $1,000 $800 $600 $400 $190 $178 $161 $269 $305 $234 $242 $250 $ $200 $331 $358 $ Q3 $ Q3 All Banks Captive Auto Credit Union Finance 4 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

5 Majority of loan balances remain prime or higher with high risk segments creeping toward 20% Loan balance risk distribution Year-over-year balance change 19.39% 19.26% 19.63% 9.86% 8.32% 41.98% 41.84% 41.71% 6.43% 5.99% 19.26% 19.11% 18.72% 4.12% 15.92% 16.04% 16.06% 3.44% 3.75% 3.87% 2015 Q3 Deep Subprime Subprime Nonprime Prime Super Prime Deep subprime Subprime Nonprime Prime Super prime 5 Experian

6 30 day delinquency rates are improving 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 6.0% 2016 Q Q3 % of loans & leases 30 dpd 4.58% 4.39% 1.97% 2.22% 2.37% 2.38% 2.39% 1.99% 1.35% 1.34% Bank Captive Credit Union Finance Total % of loan balances 30 dpd 2016 Q Q3 5.10% 5.03% 4.0% 2.0% 1.76% 1.84% 2.67% 2.85% 1.21% 1.19% 2.40% 2.43% 0.0% Bank Captive Credit Union Finance Total 6 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

7 Percentage of loan balances 30 dpd AK = 1.78% HI = 1.79% 7 Experian

8 60 day delinquency rates continue to deteriorate 2.0% 2016 Q Q3 % of loans & leases 60 dpd 1.78% 1.71% 1.5% 1.0% 0.5% 0.63% 0.66% 0.50% 0.60% 0.34% 0.33% 0.74% 0.76% 0.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Bank Captive Credit Union Finance Total % of loan balances 60 dpd 2016 Q Q3 1.93% 1.95% 0.55% 0.61% 0.60% 0.69% 0.72% 0.76% 0.28% 0.27% Bank Captive Credit Union Finance Total 8 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

9 Percentage of loan balances 60 dpd AK = 0.47% HI = 0.52% 9 Experian

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

11 Automotive financing: snapshot of how and what consumers are financing Percentage of vehicles with financing New Used 86.1% 85.5% % of all new vehicles that are leased 29.49% 29.14% 54.2% 53.1% Finance Market: new v used units New Used 52.88% 52.81% 47.12% 47.19% Used % of lease market 3.71% 3.68% 11 Experian

7% Captives and Credit Unions continue to gain market share (loan and lease units combined) Market Share of Total Financing

12 6.2% 6.1% 10.7% 10.2% 38.1% 36.1% 11.5% 11.6% 8.0% 8.4% 19.6% 21.0% 26.4% 28.4% 16.0% 15.5% 28.3% 35.1% 32.9% 29.8% 31.8% 29.5% 0.1% 0.1% 51.2% 52.6% 12.0% 13.1% 4.8% 4.7% Captives and Credit Unions continue to gain market share (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 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. 13 Experian

14 Credit scores increase across all transaction types Average new credit scores Average used credit scores New lease All new New loan Franchise used All used Independent used Q Q Q Q Q Q Experian

15 Total finance (loan & lease) and Used market reach record lows for subprime while prime continues to grow Total (new & used units) risk distribution 19.42% 20.16% 40.38% 40.90% 19.81% 19.56% 17.35% 16.60% 3.04% 2.79% Deep Subprime Subprime Nonprime Prime Super Prime New risk distribution 27.77% 28.70% 45.08% 44.98% 17.14% 9.31% 16.83% 8.84% Used risk distribution 11.89% 12.58% 36.14% 37.28% 22.21% 21.99% 24.60% 23.47% 5.16% 4.68% 15 Experian

16 Leasing becomes increasingly prime while consumers shift slightly more into the loan market New lease risk distribution % of new borrowers choosing to lease 27.34% 29.16% Prime % 34.6% 48.50% 48.35% Nonprime 29.4% 32.2% 16.60% 15.73% 7.03% 6.34% Deep Subprime Subprime Nonprime Prime Super Prime Deep & Sub 22.4% 25.1% Q Q Experian

Record low for deep subprime in the total and used loan markets Total (new & used units) loan risk distribution New loan risk distribution 27.98% 28.49% 17.94% 18.60% 38.88% 39.63% 20.44% 20.25% 19.

17 Record low for deep subprime in the total and used loan markets Total (new & used units) loan risk distribution New loan risk distribution 27.98% 28.49% 17.94% 18.60% 38.88% 39.63% 20.44% 20.25% 19.26% 18.35% 3.48% 3.17% Deep Subprime Subprime Nonprime Prime Super Prime 43.37% 43.44% 17.42% 10.44% 17.33% 9.99% Used loan risk distribution 11.85% 12.54% 36.15% 37.29% 22.28% 22.05% 24.61% 23.48% 5.11% 4.64% 17 Experian

18 41.07% 41.80% 91.47% 79.52% 67.81% 57.85% 90.96% 79.32% 67.49% 58.35% Prime+ borrowers continue to purchase used vehicles; deep subprime in Independent Dealers reaches record low Percentage of consumers by risk tier choosing used loans Used Franchise loan risk distribution 14.85% 15.66% 42.77% 43.90% 23.29% 22.79% 17.25% 16.04% Deep Subprime Subprime Nonprime Prime Super Prime Used Independent loan risk distribution 6.34% 6.93% 25.47% 26.66% 21.31% 21.34% Deep Subprime Subprime Nonprime Prime Super Prime 36.60% 35.61% 10.28% 9.45% Deep Subprime Subprime Nonprime Prime Super Prime 18 Experian

19 $25,031 $14,837 $16,725 $13,928 $28,119 $16,425 $18,396 $14,798 $31,597 $18,981 $31,929 $27,963 $20,762 $16,584 $20,761 $22,082 $18,592 $20,255 $21,189 $18,710 $30,329 $19,291 $21,000 $16,807 Average loan amounts remain high 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 $204 $249 $175 $94 $163 $37 $427 $266 $291 $176 $203 $13 $30 $35 $56 $121 $13 -$69 -$5 -$20 -$149 -$122 -$196 -$1 Deep Subprime Subprime Nonprime Prime Super Prime Total 19 Experian

20 New loan term at 69 months while higher risk loans see decreases in terms Average new term by risk tier New loan New lease Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change in term Deep Subprime Subprime Nonprime Prime Super Prime Total 20 Experian

21 Used loan terms increase Average used loan term by tier 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 21 Experian

22 Longer term loans continue to dominate the market Percentage of new loans by term 40.7% 43.2% 30.7% 30.5% 20.1% 18.7% 0.9% 1.0% Percentage of used loans by term 41.5% 41.7% 23.7% 24.0% 17.7% 17.5% 10.0% 10.0% Average new score by loan term Average used score by loan term Experian

New payments remain near record highs Average new payment by risk tier New loan New lease $502 $520 $522 $507 $475 $502 $435 $438 $419 $410 $406 $412 Deep Subprime Subprime

23 New payments remain near record highs Average new payment by risk tier New loan New lease $502 $520 $522 $507 $475 $502 $435 $438 $419 $410 $406 $412 Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change in new payment $7 $9 $11 $8 $8 $7 $6 $7 $1 $6 $6 -$27 Deep Subprime Subprime Nonprime Prime Super Prime Total 23 Experian

24 Average used payments also climb Average used payment by risk tier $388 $393 $392 $393 $382 $381 $383 $365 $351 All used Franchise used Independent used $374 $371 $379 $358 $358 $365 $355 $337 $337 Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change in used payment $8 $8 $7 $7 $5 $4 $5 $4 $4 $3 $2 $3 $3 $3 $3 $2 $4 $4 Deep Subprime Subprime Nonprime Prime Super Prime Total 24 Experian

25 13.95% 11.11% 19.38% 18.06% 16.23% 14.80% 20.39% 17.99% 6.83% 3.99% 5.45% 3.08% 3.76% 5.10% 9.98% 9.28% 5.27% 6.11% 3.72% 3.86% 11.73% 8.72% 7.61% 11.34% Average new rate rises while prime shift to used and overall higher scores results in lower rates in the used market 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 25 Experian

Summary Portfolio balances reach record levels Delinquency increases begin to taper off Leasing remains strong at 29% of all new consumer vehicle sales Credit scores improve as lending continues to

26 Summary Portfolio balances reach record levels Delinquency increases begin to taper off Leasing remains strong at 29% of all new consumer vehicle sales Credit scores improve as lending continues to shift into more prime segments Prime consumers also increasing choosing used vehicles resulting in score increases and greater percentage of prime loans Deep subprime reaches record lows in used lending Terms continue to extend and seeing growth in 85+ for new financing 26 Experian

State of the Automotive Finance Market

State of the Automotive Finance Market A look at loans and leases in Q1 2018 Presented by: Melinda Zabritski Sr. Director, Financial Solutions www.experian.com/automotive 2018 Experian Information Solutions,