State of the Automotive Finance Market

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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 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 Billions $1,150 $1,100 $1,050 $1,000 $987 $1, % $1, % Billions $1,200 $1,000 $800 $600 $400 $166 $241 $244 $179 $189 $277 $313 $252 $259 $ % $200 $337 $364 $368 $ Q4 $ Q4 All Banks Captive Auto Credit Union Finance 4 Experian Source: Experian-Oliver Wyman Market Intelligence Reports

5 Percentage of subprime shrinks as prime+ reaches nearly 61% of outstanding auto loan balances Loan balance risk distribution Year-over-year balance change 19.06% 18.72% 19.17% 7.85% 6.25% 41.86% 41.64% 42.00% 3.39% 3.72% 19.32% 19.25% 18.96% 16.10% 16.41% 16.11% 3.66% 3.98% 3.77% 2015 Q4 Deep Subprime Subprime Nonprime Prime Super Prime -0.29% 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 Q4 % of loans & leases 30 dpd 4.65% 4.48% 1.99% 2.32% 2.39% 2.44% 2.36% 1.82% 1.43% 1.34% Bank Captive Credit Union Finance Total % of loan balances 30 dpd 2016 Q Q4 5.21% 5.12% 4.0% 2.0% 1.81% 1.66% 2.85% 2.92% 1.28% 1.17% 2.48% 2.39% 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 = 1.69% HI = 1.79% 7 Experian

8 60 day delinquency rates also improve 2.0% 2016 Q Q4 % of loans & leases 60 dpd 1.82% 1.73% 1.5% 1.0% 0.5% 0.67% 0.61% 0.58% 0.61% 0.37% 0.34% 0.78% 0.76% 0.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Banks Captive Credit Union Finance Total % of loan balances 60 dpd 2016 Q Q4 2.00% 1.97% 0.59% 0.69% 0.78% 0.56% 0.71% 0.75% 0.31% 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 = 0.57% HI = 0.58% 9 Experian

10 Delinquency improvement in some of the larger states is driving overall 60 DPD balance decreases States with decreasing 60 DPD balances (bps change) FL TX DC VT ID SD OK MT CO AZ WI NH UT ME States with <1 bps change in 60 DPD balances GA WV ND WA MA States with increasing 60 DPD balances (bps change) AK CT OR NE AR MS NM LA VA WY NC MI PA IA NJ MD HI KS KY AL OH NY CA IN IL SC RI NV TN MO MN DE 10 Experian

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

12 Automotive financing: snapshot of how and what consumers are financing Percentage of vehicles with financing New Used 85.2% 85.1% % of all new vehicles that are leased 28.94% 28.28% 53.5% 53.8% Finance Market: new v used units New Used 53.62% 52.61% 46.38% 47.39% Used % of lease market 3.97% 4.06% 12 Experian

13 Captives and Credit Unions continue to gain market share (loan and lease units combined) Market Share of Total Financing (new/used units & loan/lease) 30.6% Market Share of New Financing 29.4% 0.1% 0.1% 52.0% 52.4% 11.9% 13.4% 5.4% 4.7% 32.9% 32.2% 6.0% 6.4% 28.4% 29.9% 19.1% 21.1% 13.5% 10.4% Bank BHPH Captive Credit Union Finance Co Market Share of Used Financing 35.0% 34.8% 11.1% 12.4% 8.0% 8.6% 25.4% 28.4% 20.5% 15.8% 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 711 Franchise used All used Independent used Q Q Q Q Q Q Experian

16 Total finance (loan & lease) market remains at record, or near record lows for subprime financing Total (new & used units) risk distribution 19.40% 19.89% 40.01% 40.68% 19.77% 19.64% 17.62% 16.93% 3.20% 2.86% Deep Subprime Subprime Nonprime Prime Super Prime New risk distribution 27.98% 28.58% 44.74% 45.22% 17.12% 9.43% 16.83% 8.77% Used risk distribution 11.90% 11.97% 35.86% 36.55% 22.09% 22.20% 24.79% 24.37% 5.36% 4.92% 16 Experian

17 Leasing remains very prime despite a drop in prime consumers choosing to lease New lease risk distribution % of new borrowers choosing to lease 28.15% 29.09% Prime % 33.8% 48.12% 48.37% Nonprime 31.6% 30.0% 16.32% 15.71% 6.93% 6.40% Deep Subprime Subprime Nonprime Prime Super Prime Deep & Sub 24.2% 23.4% Q Q Experian

18 Record low for deep subprime in the total and used loan markets Total (new & used units) loan risk distribution New loan risk distribution 27.89% 28.33% 17.81% 18.22% 38.54% 39.31% 20.43% 20.39% 19.56% 18.82% 3.66% 3.27% Deep Subprime Subprime Nonprime Prime Super Prime 43.06% 43.72% 17.52% 10.67% 17.36% 9.89% Used loan risk distribution 11.85% 11.90% 35.87% 36.55% 22.15% 22.27% 24.81% 24.39% 5.32% 4.88% 18 Experian

19 Prime consumers shift slightly away from used vehicles yet used subprime financing remains at record lows 91.27% 91.92% Deep Subprime Percentage of consumers by risk tier choosing used loans 79.75% 79.80% 68.17% 67.27% 58.52% 57.25% 41.85% 40.23% Subprime Nonprime Prime Super Prime Used Franchise loan risk distribution 14.70% 15.13% 42.44% 43.58% 23.38% 23.22% 17.56% 16.42% Deep Subprime Subprime Nonprime Prime Super Prime Used Independent loan risk distribution 6.28% 24.92% 6.51% 25.74% 21.09% 21.23% 36.91% 36.73% 10.80% 9.79% Deep Subprime Subprime Nonprime Prime Super Prime 19 Experian

20 Record highs for average new and used loan amounts Average loan amount by tier Avg New All Used Franchise used Independent used $25,533 $14,863 $16,675 $14,022 $28,603 $16,557 $18,574 $14,930 $32,362 $19,347 $21,183 $16,853 $32,727 $21,162 $22,512 $18,861 $28,729 $20,655 $21,644 $19,034 $31,099 $19,589 $21,375 $17,002 Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change in balance $81 $201 $3 $528 $483 $509 $329 $112 $182 $272 $211 $317$398 $287 $348 $208 $64 $71 $158 $153 $96 $133$166 -$134 Deep Subprime Subprime Nonprime Prime Super Prime Total 20 Experian

21 New loan term at 69 months and show increases in higher credit tiers 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 Experian

22 Used loan terms rise, yet decrease for high risk franchise used loans 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 22 Experian

23 Longer term loans continue to dominate the market Percentage of new loans by term 40.3% 44.0% 32.1% 30.0% 18.7% 18.5% 0.9% 1.0% Percentage of used loans by term 41.1% 41.8% 23.6% 23.8% 18.2% 17.9% 10.0% 10.0% Average new score by loan term Average used score by loan term Experian

24 New monthly payments leap to $515 hitting all time high Average new payment by risk tier New loan New lease $509 $527 $534 $521 $489 $515 $460 $447 $435 $428 $426 $430 Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change in new payment $5 $25 $16 $16 $15 $16 $17 $9 $9 $6 $8 $5 Deep Subprime Subprime Nonprime Prime Super Prime Total 24 Experian

25 Average used payments reach record highs Average used payment by risk tier All used Franchise used Independent used $390 $393 $394 $397 $385 $384 $389 $381 $371 $379 $385 $364 $365 $371 $356 $360 $341 $344 Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change in used payment $9 $10 $8 $9 $8 $8 $7 $6 $5 $6 $6 $4 $5 $5 $6 $8 $8 $7 Deep Subprime Subprime Nonprime Prime Super Prime Total 25 Experian

26 Rates rise across the entire automotive loan market Average loan rates by tier Avg New All Used Franchise used Independent used 13.76% 19.32% 18.10% 20.28% 10.98% 16.27% 14.84% 18.02% 6.79% 10.01% 9.24% 11.83% 4.03% 5.48% 5.28% 6.14% 3.17% 3.80% 3.76% 3.90% 5.11% 8.84% 7.68% 11.48% Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change (bps) in loan rate Deep Subprime Subprime Nonprime Prime Super Prime Total 26 Experian

27 Summary Outstanding loan balances continue to set record highs Delinquency rates beginning to improve Leasing remains strong with over 28% of all new consumer vehicle sales Credit scores improve as lending continues to shift into more prime segments Deep subprime reaches record lows in used lending Loan amounts and payments reach record highs for both new and used vehicle financing While longer term loan remain the norm, there s a decrease in month loans in both new and used financing; while new sees slight growth in Experian

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