KEY MARKET TRENDS F O R J A N U A R Y 1 7,

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2 KEY MARKET TRENDS F O R J A N U A R Y 1 7,

3 While economic growth has been anemic in this expansion, momentum is picking up

4 F Annual % Change Economic expansion will continue with accelerating momentum US ECONOMIC GROWTH SINCE WORLD WAR II Recession Real GDP Growth (Annual) ECONOMIC MOMENTUM Source: United States Bureau of Economic Analysis

5 Plans to purchase remain high with consumer confidence near a 17-year high

6 The auto market will see continued stable demand Consumer Confidence Index (Index 1985=100, SA) Plans to Buy Auto in 6 Months (% SA) Plans to Buy Auto (12 mo MA) UNWAVERING DEMAND FOR AUTOS Source: The Conference Board, Moody s Analytics

7 New vehicle sales had a challenging spring and summer, but ended the year with four strong months

8 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 DAYS' SUPPLY LT. VEHICLE SAAR (MILLIONS) The new vehicle market starts 2018 in relatively healthier position NEW VEHICLE DAYS' SUPPLY VS. SAAR Days' Supply SAAR NEW VEHICLE MARKET ON BETTER FOOTING Source: Autodata Days Supply, United States Bureau of Economic Analysis New Lt. Vehicle SAAR

9 CUVs and SUVs are only segments expected to grow in 2018 but they will face more off-lease competition

10 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 The CUV continues its rise but will face more nearly-new competition SHARE OF NEW LIGHT VEHICLE SALES OFF-LEASE MATURITIES SEGMENT SHARE 60% 60.0% 50% 50.0% THE SHIFT EVOLVES 40% 40.0% 30% 30.0% 20% 20.0% 10% 10.0% 0% 0.0% CUV Car Van SUV Pickup CAR CUV SUV PICKUP VAN Source: Motor Intelligence/Autodata new sales by segment, IHS Markit registrations, Cox Automotive analysis

11 The composition is changing as more CUV, SUV, and Pickups hit the wholesale market

12 Nearly 3.9 million vehicles will reach the end of their lease in 2018 OFF LEASE SUPPLY TO USED MARKET CHANGES Source: Cox Automotive

13 Last year saw a rough first quarter for used vehicle prices, which made residuals look dire

14 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec RETAINED VALUE AS % OF MSRP Relative stability in wholesale prices but another rough start of the year MANHEIM USED VEHICLE VALUE INDEX ($ SA) BY MONTH $13,000 $12,500 $12,000 $11, % 100.0% 90.0% 80.0% 70.0% 3-YEAR-OLD MODEL INDEX BY WEEK 65% 63% 61% 59% 57% 55% 53% 1 TO 3 YEAR OLD MODELS CY 2015 CY 2016 CY 2017 USED VEHICLE PRICES 51% $11, % 49% 47% $10, % % Source: Manheim, Kelley Blue Book, Cox Automotive

15 Super prime rates on new vehicles haven t moved much yet, but rates vary and can move without the Fed raising

16 INTEREST RATE % INTEREST RATE % INTEREST RATE % ON SUBPRIME LOANS The era of low rates is over; how quickly will they move? DISCOUNT RATE VS. AUTO LOAN RATE RATE SPREAD, NEW VS USED BY MAJOR CREDIT TIERS New Super Prime New Ave Credit Used Ave Credit New Subprime (RH) Used Subprime (RH) INTEREST RATE DIRECTION AND PACE Discount 60-Mo New Auto Loan Source: Federal Reserve, Bankrate.com, Bloomberg; Dealertrack; Cox Automotive

17 Tighter standards disproportionately impact younger buyers; adults under 35 are 70% more likely to be deep subprime

18 4/1/11 7/1/11 10/1/11 1/1/12 4/1/12 7/1/12 10/1/12 1/1/13 4/1/13 7/1/13 10/1/13 1/1/14 4/1/14 7/1/14 10/1/14 1/1/15 4/1/15 7/1/15 10/1/15 1/1/16 4/1/16 7/1/16 10/1/16 1/1/17 4/1/17 7/1/17 10/1/17 Credit access continues to tighten, impacting composition of buyers MILLENNIALS VS ALL ADULTS Net Percentage of Domestic Banks Tightening Standards for Auto Loans Net Percentage of Domestic Banks Reporting Stronger Demand for Auto Loans 100.0% 10.7% 6.2% % 14.2% % 20.5% 10.2% 70.0% % 13.9% 16.3% % 20.4% 40.0% % 52.0% % 34.3% DEMOGRAPHIC IMPACT OF TIGHTENING CREDIT % % Total US Super Prime (>=720) Prime ( ) Near Prime ( ) Subprime ( ) Deep Subprime (<530) Unscorable Source: Federal Reserve Bank Senior Loan Officer Survey, Equifax Vantage Score Distribution of Active Credit Consumers December 2017

19 Millennials are far more likely to buy used than new

20 Big differences in who buys new and used vehicles AGE DISTRIBUTION OF BUYERS, NEW VS. USED 3-YEAR-OLD, USED, AND ADULTS IN US 100.0% 7.2% 4.7% 4.4% 8.3% 90.0% 10.9% 10.2% 16.1% 11.7% 80.0% 20.6% 19.9% 70.0% 16.7% 23.1% 60.0% 16.9% 25.9% 50.0% 25.8% 23.1% 40.0% 16.3% 30.0% 23.1% 24.1% 20.0% 20.0% 17.4% 75+ YEARS OLD YEARS OLD YEARS OLD YEARS OLD YEARS OLD YEARS OLD YEARS OLD DEMOGRAPHICS OF BUYERS 10.0% 0.0% 13.5% 13.6% 9.8% 12.6% 0.8% 1.4% 1.9% New Used 3YO Used Adults Source: IHS Markit Polk Registrations, Cox Automotive analysis, Claritas Pop-Facts Demographics US Population

21 2017 began the decline of new vehicle sales, but used more than offset the decline

22 MILLIONS Auto market growth is plateauing with used still gaining VEHICLE SALES BY YEAR AND TYPE, ACTUAL AND FORECAST New - Retail New - Fleet Used USED SALES EXPECTED TO CONTINUE TO GROW F Source: BEA New Vehicle Sales, Bobit Fleet Sales, and IHS Markit Registrations (history); Cox Automotive forecast

23 KEY MARKET TRENDS F O R Jonathan Smoke jonathan.smoke@coxautoinc.com JANUARY 17, 2018