State of the Automotive Finance Market Third Quarter 2015

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1 State of the Automotive Finance Market Third Quarter 2015 Melinda Zabritski Sr. Director Financial Solutions Experian Information Solutions, Inc. Inc. All rights All rights reserved. reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned Experian herein are Public. 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 1

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

3 VantageScore 3.0 ranges Score ranges Category VantageScore 3.0 Super prime Prime Nonprime Subprime Deep subprime

4 INSERT PICTURE HERE Originations New and used lending 4

5 47.0% 49.9% 52.3% 52.6% 54.1% 55.3% 79.9% 81.4% 83.1% 84.8% 84.8% 86.6% Growing reliance upon financing 100% 90% New Used Percentage of vehicles with financing 80% 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 <=1990

6 <=1990 Percentage of used model year vehicles without loans 100% 90% 60.9% of all vehicles financed in Q were used 80% 70% 60% 50% 40% 30% 20% 10% 0% 6

7 Consumer leasing 35% 30% 25% 20% 15% 10% 5% 0% 31.09% 29.14% 27.22% 26.93% 24.40% 24.71% 22.75% 22.69% 23.07% 20.28% 18.09% 18.46% 14.48% 15.43% 13.26% 11.69% 10.23% 10.30% Lease % of total Lease % of new financing Lease % of all new Q Q Q Q Q Q

Leasing and consumer credit 800 700 600 500 400 300 New 96.

New leasing by risk segment 26.79% 25.97% 48.93% 48.57% 17.

8 Leasing and consumer credit New 96.7% Lease by vehicle type Average lease scores Q Q Used 3.3% New Used 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% New leasing by risk segment 26.79% 25.97% 48.93% 48.57% 17.16% 17.66% 6.72% 7.34% Q Q Deep subprime Subprime Nonprime Prime Super prime 8

9 1.4% 2.0% 2.5% 2.3% 2.1% 2.4% 2.3% 2.2% 2.1% 2.0% 1.9% 1.7% 2.8% 2.8% 2.6% 3.1% 3.1% 3.7% 3.6% 3.7% Top 10 new models based on share of the new lease market 4.0% 3.5% Q Q % 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 9

679 686 691 696 701 697 697 698 715 709 710 708 703 715 727 730 728 719 730 745 Average score comparison on top new leased

10 Average score comparison on top new leased models 760 Loan score Lease score CIVIC ACCORD CAMRY CR-V COROLLA RAV4 ESCAPE FUSION ALTIMA F150 10

11 Average new lease characteristics Average monthly payment Term distribution $445 $435 $425 80% 70% 60% 50% 70.28% Average term = 35 months $415 40% $405 30% $395 $385 $375 $397 $398 Q Q % 10% 0% 10.20% 18.97% 0.48%

12 $245 $305 $299 $260 $357 $322 $354 $325 $318 $303 $299 $412 $418 $421 $431 $407 $408 $425 $459 $581 Average payment comparison on top new leased models $700 $600 Loan payment Lease payment $500 $400 $300 $200 $100 $ CIVIC ACCORD CAMRY CR-V COROLLA RAV4 ESCAPE FUSION ALTIMA F150 12

13 Automotive finance by lender type Q total loan market share YOY change in market share Finance 6.4% Credit Union 17.14% Finance 13.34% Bank 34.66% -2.3% Captive Credit Union 2.3% -5.4% BHPH Captive 28.68% BHPH 6.18% -2.0% Bank -10% -5% 0% 5% 10% 13

14 Automotive finance by lender type 100% 90% 80% 70% 60% 50% 40% 30% Q market share by lender type 4.77% 9.82% 21.25% 23.89% 51.62% 7.53% 11.74% 0.15% 10% 5% 0% -5% YOY Change in market share New Used Bank -1.7% -2.4% BHPH -5.4% 2.9% -0.3% Captive Credit Union -0.1% 6.7% 5.0% Finance 20% 10% 33.65% 35.60% -10% -7.8% 0% New loan Used loan -15% -13.5% Bank BHPH Captive Credit Union Finance 14

15 1.78% 1.72% 1.61% 1.17% 1.12% 1.11% 1.10% 1.09% 1.07% 0.93% 0.83% 2.89% 2.52% 2.44% 4.23% 4.15% 4.15% 4.08% 6.00% 5.57% Top 20 lenders in the retail loan market 7% 6% 5% Top 20 represent 49.7% of all retail loans 4% 3% 2% 1% 0% 15

16 2.28% 2.22% 2.04% 2.03% 1.91% 1.70% 1.55% 1.41% 1.27% 1.05% 1.04% 4.23% 3.98% 3.68% 5.67% 6.95% 6.63% 8.17% 8.01% 10.04% Top 20 lenders in the NEW retail loan market 12% 10% 8% Top 20 represent 75.9% of all new retail loans 6% 4% 2% 0% 16

17 1.94% 1.90% 1.78% 1.47% 1.25% 1.17% 1.14% 1.09% 0.94% 0.89% 0.89% 0.83% 0.79% 0.76% 0.76% 2.58% 3.36% 4.11% 4.87% 6.71% Top 20 lenders in the USED retail loan market 8% 7% 6% Top 20 represent 39.2% of all used retail loans 5% 4% 3% 2% 1% 0% 17

18 Average loan credit scores by vehicle type New Used 580 Q Q Q Q Q Q Q Q Q

19 Automotive loans by risk segment 100% 90% 80% 70% New loans 27.98% 27.57% 100% 90% 80% 70% Used loans 11.15% 11.21% 34.80% 34.77% 60% 60% 50% 40% 44.00% 43.25% 50% 40% 22.00% 22.38% 30% 30% 20% 10% 0% 17.45% 17.73% 9.90% 0.67% 10.67% 0.78% Q Q % 10% 0% 26.52% 26.24% 5.53% 5.40% Q Q Super prime Prime Nonprime Subprime Deep subprime 19

20 Risk distribution by lender type 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Risk distribution of market share 20.5% 45.1% 21.2% 3.8% 13.8% 15.1% 47.9% 26.6% 41.8% 17.8% 47.3% 18.8% 23.0% 12.4% 19.5% 11.8% 11.1% 0.8% 1.0% 0.8% Bank BHPH Captive Credit Union Deep subprime Subprime Nonprime Prime Super prime 3.3% 11.1% 20.7% 54.0% 10.9% Finance 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% YOY change in highest risk (<600) segment 1.7% -2.8% 8.5% Bank BHPH Captive Credit Union -6.1% Finance -0.8% 20

Risk distribution by lender type Percentage of financing in

Bank 13.7% 7.2% 19.5% 11.0% 15.6% 9.6% 27.1% 40.6% 69.4% 67.

in highest risk segments 9.06% 12.07% 2.

21 Risk distribution by lender type Percentage of financing in highest risk segments (<600) Finance Credit Union Captive BHPH Bank 13.7% 7.2% 19.5% 11.0% 15.6% 9.6% 27.1% 40.6% 69.4% 67.7% Used New 0% 20% 40% 60% 80% 15% 10% 5% 0% -5% -10% YOY change in highest risk segments 9.06% 12.07% 2.49% Bank BHPH Captive Credit -1.71%-1.48% Union -2.84% -4.66% New Used -7.27% 4.31% Finance -1.97% 21

$18,576 $18,866 $27,799 $28,936 Average financing by risk segment on new and used vehicle loans $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 Average amount financed $ New $1,137 Q3 2014 Q3

22 $18,576 $18,866 $27,799 $28,936 Average financing by risk segment on new and used vehicle loans $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 Average amount financed $ New $1,137 Q Q Used $290 Super prime Prime Nonprime Subprime Deep subprime Super prime Prime Nonprime Subprime Deep subprime Average new amount financed $25,302 $26,414 $28,957 $30,254 $29,399 $30,517 $27,047 $27,711 $25,032 $25,097 Q Q $ $10,000 $20,000 $30,000 $40,000 Average used amount financed $16,130 $16,319 $14,298 $14,535 $19,423 $19,825 $19,957 $20,336 $18,571 $18,850 Q Q $ $10,000 $20,000 $30,000 22

23 $358 $361 $470 $482 Average payments by risk segment on new and used vehicle loans $600 $500 $400 $300 Average monthly payment $12 $3 Average new payment Super prime $445 $457 Prime Nonprime Subprime Deep subprime $472 $485 $490 $503 $498 $510 $495 $508 Q Q $400 $420 $440 $460 $480 $500 $520 Average used payment $200 $100 $ New Q Q Used Super prime $349 $352 Prime $349 $352 Nonprime $359 $362 Subprime $378 $378 Deep subprime $382 $381 Q Q $330 $340 $350 $360 $370 $380 $390 23

24 Payment gap grows between new and used loans $125 $120 Average payment difference between new & used car loans $121 $115 $110 $109 $108 $108 $112 $105 $100 $102 $95 $90 Q Q Q Q Q Q

Average term by risk segment on new and used vehicle loans 68 67 66 65 64 63 62 61 60 59 66 Average term New 1 mo 67 62 Q3 2014 Q3 2015 Used 1 mo 63 Super prime Prime Nonprime Subprime Deep subprime

25 Average term by risk segment on new and used vehicle loans Average term New 1 mo Q Q Used 1 mo 63 Super prime Prime Nonprime Subprime Deep subprime Super prime Prime Nonprime Subprime Deep subprime Average new term Q Q Average used term Q Q

26 Distribution of loan term 100% Vehicle financing by term 90% 80% New Used 70% 60% 50% 40% 30% 20% 10% 0% 3.2% 3.5% 17.1% 43.5% 41.3% 12% 27.5% 23.7% 20.6% 16.2% 11.3% 5.8% 3.0% 4.3%

00% Average rate New 16 bps Q3 2014 Q3 2015 Used 22 bps Super prime Prime Nonprime Subprime Deep subprime Super prime Prime Nonprime Subprime

27 4.47% 4.63% 8.54% 8.76% Average rate by risk segment on new and used vehicle loans 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Average rate New 16 bps Q Q Used 22 bps Super prime Prime Nonprime Subprime Deep subprime Super prime Prime Nonprime Subprime Deep subprime 2.63% 2.58% 3.54% 3.50% 6.08% 6.25% Average new rate 10.16% 10.57% 12.72% 13.99% Q Q % 5.00% 10.00% 15.00% 20.00% 3.33% 3.35% 5.07% 5.12% Average used rate 9.29% 9.59% 15.72% 15.98% 19.00% 19.46% Q Q % 5.00% 10.00% 15.00% 20.00% 25.00% 27

28 INSERT PICTURE HERE Overall Automotive Finance Market Market overview and delinquency 28

29 A look at automotive loan balances Source: Experian-Oliver Wyman Market Intelligence Reports 29

30 Open loan overview Super prime Prime Nonprime Subprime Deep subprime Source: Experian-Oliver Wyman Market Intelligence Reports 30

31 Recent automotive delinquency: 30 day delinquency Source: Experian-Oliver Wyman Market Intelligence Reports 31

32 30-day delinquency balances by state 1.43 HI = 1.91% Source: Experian-Oliver Wyman Market Intelligence Reports 32

33 Recent automotive delinquency: 60 day delinquency Source: Experian-Oliver Wyman Market Intelligence Reports 33

34 60-day delinquency balances by state 0.39% HI = 0.48% Source: Experian-Oliver Wyman Market Intelligence Reports 34

35 Balances at risk Source: Experian-Oliver Wyman Market Intelligence Reports 35

In summary Modest high risk growth for new financing; used down YOY Captives reaching pre-recession share for new financing driven in part by growth in high risk, yet still below pre-recession levels

36 In summary Modest high risk growth for new financing; used down YOY Captives reaching pre-recession share for new financing driven in part by growth in high risk, yet still below pre-recession levels Loan amounts continue to grow; with gap between new and used payments rising despite increase in terms Rates on new financing have increased in conjunction with growth in high risk originations Open balances reach all-time highs with majority of loans/balances in prime+ Fewer loans becoming delinquent (30 dpd) yet increases in balances tied to delinquent loans 36

State of the Automotive Finance Market Fourth Quarter 2015

State of the Automotive Finance Market Fourth Quarter 2015 Melinda Zabritski Sr. Director Financial Solutions 2016 2015 Experian Information Solutions, Inc. Inc. All rights All rights reserved. reserved.