State of the Automotive Finance Market A look at loans and leases in Q4 2017 Presented by: Melinda Zabritski Sr. Director, Financial Solutions www.experian.com/automotive 2018 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.
Session overview Market Overview Outstanding balances Total risk distributions Delinquency Originations New and Used financing Lender and transaction types Loan & lease characteristics 2 Experian
Overall Automotive Finance Market A review of all open automotive loans & leases 3 Experian
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 $1,072 8.58% $1,129 5.31% Billions $1,200 $1,000 $800 $600 $400 $166 $241 $244 $179 $189 $277 $313 $252 $259 $950 11.47% $200 $337 $364 $368 $900 2015 Q4 $0 2015 Q4 All Banks Captive Auto Credit Union Finance 4 Experian Source: Experian-Oliver Wyman Market Intelligence Reports
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
30 day delinquency rates are improving 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 6.0% 2016 Q4 2017 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 Q4 2017 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
Percentage of loan balances 30 dpd AK = 1.69% HI = 1.79% 7 Experian
60 day delinquency rates also improve 2.0% 2016 Q4 2017 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 Q4 2017 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
Percentage of loan balances 60 dpd AK = 0.57% HI = 0.58% 9 Experian
Delinquency improvement in some of the larger states is driving overall 60 DPD balance decreases -20-9 States with decreasing 60 DPD balances (bps change) -7-7 -7-5 -4-26 -30 FL TX DC VT ID SD OK MT CO AZ WI NH UT ME -3-3 -2-2 -2-1 0-10 -20 States with <1 bps change in 60 DPD balances -0.5-0.4 0.1 0.0 0.2 0.0-0.2-0.4-0.5-0.6 GA WV ND WA MA 15 10 14 11 11 10 9 9 8 7 6 States with increasing 60 DPD balances (bps change) 5 5 5 5 5 5 4 4 4 3 3 3 2 2 2 2 2 2 1 1 1 1 1 1 - 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
Originations in Q4 2017 Trends in automotive loan and lease originations 11 Experian
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
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
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
Credit scores show year-over-year improvement Average new credit scores Average used credit scores 719 716 715 717 714 712 715 712 720 714 711 722 716 713 673 672 673 677 681 646 648 649 600 603 607 654 656 614 617 New lease All new New loan 711 Franchise used All used Independent used Q4 2013 Q4 2014 Q4 2015 Q4 2013 Q4 2014 Q4 2015 15 Experian
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
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 + 34.8% 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% Q4 2016 Q4 2017 17 Experian
Record low for deep subprime in the total and used loan markets Total (new & used units) loan risk distribution New loan risk distribution 27.89% 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
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
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
New loan term at 69 months and show increases in higher credit tiers Average new term by risk tier New loan New lease 72.06 72.52 72.78 70.13 63.69 69.06 37.36 37.25 37.06 36.46 35.51 36.33 Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change in term 0.05 0.25-0.01-0.24-0.20-0.10-0.12-0.25-0.19 Deep Subprime Subprime Nonprime Prime Super Prime Total 0.54 0.99 0.53 21 Experian
Used loan terms rise, yet decrease for high risk franchise used loans Average used loan term by tier All Used Franchise used Independent used 65.35 58.25 61.71 66.94 65.1167.94 65.7367.13 62.0662.84 64.1266.63 54.62 57.25 60.86 63.00 60.62 60.20 Deep Subprime Subprime Nonprime Prime Super Prime Total Year-over-year change in used loan term 0.33 0.36 0.20 0.31 0.41 0.26 0.30 0.13 0.10 0.17 0.26 0.18 0.53-0.09-0.07-0.03-0.41-0.72 Deep Subprime Subprime Nonprime Prime Super Prime Total 22 Experian
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% 49-60 61-72 73-84 85-96 Percentage of used loans by term 41.1% 41.8% 23.6% 23.8% 18.2% 17.9% 10.0% 10.0% 37-48 49-60 61-72 73-84 Average new score by loan term 756 759 700 702 682 687 696 699 656 Average used score by loan term 686 687 659 661 663 669 674 49-60 61-72 73-84 85-96 37-48 49-60 61-72 73-84 23 Experian
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
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
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 17 29 48 11 28 66 58 52 42 36 46 57 43 54 39 40 37 41 41 46 37 30 18 11 Deep Subprime Subprime Nonprime Prime Super Prime Total 26 Experian
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 72-84 month loans in both new and used financing; while new sees slight growth in 85+ 27 Experian