Auto Financing · PDF fileConfidential and Proprietary 3 1 2 The auto financing 3Low oil prices and growing consumer debt Delinquency rates begin trending higher industry remains strong

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Auto Financing

Credit Trends

Q1-2016

Equifax Canada Co.

1

Confidential and Proprietary

2

Automotive leases rebounding to pre-recession levels

Delinquency rates begin to rise after reaching historical lows

last year

Higher dollar amounts continue being lent to consumers

Regional Auto Delinquency Trends 60+ DPD rates (based on $)

Rising delinquency rates impacting Captives more than

Banks

Regional Auto Charge-off Trends (based on $)

Higher Charge-off rates for Captives while improvements for

Banks

Higher Bankruptcies impacting the Western region

Credit Trend Highlights

Details in Appendix – Slides 31-38


3

1 2 3 Low oil prices and growing

consumer debt

Delinquency rates begin

trending higher

The auto financing

industry remains strong

• Canadian consumer debt near

all-time high: Debt totals over

$1.618 Trillion Dollars

• Credit growth steadily rose

4.8% YoY this quarter, but

slowed from the previous

quarter down 0.21%

• Consumer delinquency rate (90+

days past due) rose 3.2% YoY this

quarter

• Auto Finance delinquency rate ↑

13.5% YoY and ↑ 6.1% since last

quarter (Alberta: ↑ 31.5% YoY in

delinquency rate and ↑ 21.8% YoY

in Charge-off rate)

• Ontario Charge-off rate up 16.1%

YoY, while Quebec was flat

• Lenders continue to fund larger

amounts to consumers as

interest rates continue to remain

low

• Continued strong demand offset

by weakness in the Western

region

• Total Outstanding’s up 5.9% YoY

this quarter

Bank of Canada remains vocal about growing levels of

debt, as majority of Canadians continue to pay their

debt obligations responsibly

Source: Equifax Database


4

Automotive leases rebounding to pre-

recession levels


Auto Leases

2015 2015 2015 2016

Total Debt Q2 Q3 Q4 Q1

Auto Loans -0.5% 0.2% 0.5% 0.8%

Auto Leases 20.5% 22.7% 23.7% 22.9%

Total Auto Financing 3.9% 5.1% 5.7% 5.9%

Year over Year

Consistent growth in Auto Financing as new vehicle sales continue to push Auto Leases to new levels

Strong growth in Ontario and Quebec, offset by a pull back in demand in Western Canada

Alberta and Saskatchewan saw Total Debt Balances drop 6% and 3.6% YoY, respectively this quarter

Auto Loans


5

Recent growth stemming from the Silent

Generation

Source: Equifax Database (* Pre-work force (18-25), Millennials (26-35), Gen X (36-45), Baby Boomers (46-65), Silent Gen (65+))

Non-Bank Captive

balance distribution as

of Q1-2016

Non-Bank Captive – Y/Y % change in balance

Bank Installment


of Q1-2016

Bank Installment – Y/Y % change in balance


6

Banks see growth in Subprime, while

Captives chase Super Prime

Source: Equifax Database (* Deep Subprime (320-540), Subprime (541-620), Near Prime (621-680), Prime (681-740), Super Prime (741+))

Non-Bank Captive


of Q1-2016

Non-Bank Captive – Y/Y % change in balance

Bank Installment


of Q1-2016

Bank Installment – Y/Y % change in balance


7

Delinquency rates begin to rise after

reaching historical lows last year

Auto Finance delinquency has risen faster and remains lower than Bank Installment credit products, but the gap is closing


Bank Installment

Bank Revolving

National Credit Card

Auto Finance

Overall 3.2% 5.5%

2016Q1 Q/Q

8.9%

4.0%

5.7%

6.1%13.5%

2016Q1 Y/Y

-0.1%

1.7%

2.3%

90+ Delinquency Rate


8

Higher dollar amounts continue being lent

to consumers


+11%

Post-crisis, the combination of longer terms and increased affordability has allowed consumers to buy more expensive vehicles

Shift in consumer preference towards light utility vehicles over passenger cars; aided by low interest rate environment and favourable gas prices


9

Regional Auto Delinquency Trends

60+ DPD rates (based on $)

Delinquency in Atlantic provinces

increased across the board.

Auto related delinquency increased

in Oil producing provinces.

Oil impacted regions are seeing higher increases in mid-stage delinquency

rates



10

Rising delinquency rates impacting

Captives more than Banks


60+ Delinquency – Region

Automotive Financing, Non-Bank Captive

• Overall up 14.3% YoY

• YoY increase in delinquency rates

across every region with the Western

region ahead by 22.9% followed

closely by Ontario at 17.9%


• YoY improvements in almost every

region with the exception of the

Western region, up 24.6%


Automotive Financing, Bank Installment


11

Regional Auto Charge-off Trends

Charge-off rates (based on $)

Auto related (gross) charge-off rates are increasing in Western and Eastern

provinces



12

Higher Charge-off rates for Captives

while improvements for Banks

Charge-off – Region



• YoY Charge-off rates higher in every

region with the exception of Quebec

which saw a minor reduction of 1.2%

this quarter

• Overall down 9% YoY

• YoY improvements in losses for

Ontario and Quebec, -19.1% and -

13.2%, respectively

• The West was flat YoY with the East up

8.1% YoY

Charge-off – Region




13

Higher Bankruptcies impacting the

Western region

Bankruptcies – Region


• Bankruptcies up 11.8% YoY

• Western and Eastern regions leading

the way with increases of 24.3% and

21.2%, respectively

• Bankruptcies up 11.5% YoY

• Western region higher by 27.1% YoY,

followed by Quebec at 8.0%

Bankruptcies – Region




14

Regional Auto Delinquency Trends

30+ DPD rates (based on $)

Delinquency in Atlantic provinces

increased across the board.

Auto related delinquency increased

in Oil producing provinces.

Oil impacted provinces continue to see sharp increases in early stage

delinquency rates – West overtakes the East



15

Rising delinquency rates impacting

Captives more than Banks





• Western region leading the way up

19.9% YoY, followed by Ontario up

9.2%

• Quebec remained flat down 1.1% YoY


• Western region up 24.2% YoY, while

Ontario and Quebec were both down

4.8% and 2.6%, respectively




16

Appendix


17

Majority of consumer inquiries

traditionally been Near Prime or below


Risk Score Band

Definitions

Super Prime (741+)

Prime (681-740)

Near Prime (621-680)

Subprime (541-620)

Deep Subprime (320-540)

~46% of

inquiries are

Subprime


18

If you would like to learn more about out auto insights, please contact:

Jeff Brubacher, Account Manager Russell Wicks, National Account Executive

Equifax Canada Co. Equifax Canada Co.

[email protected] [email protected]

416-303-1046 647-539-5381

mailto:[email protected]

mailto:[email protected]


19

Disclaimer

All marks used herein are trademarks of Equifax Canada Co. This presentation is for informational purposed

only and is not legal advise and should not be used, or interpreted, as legal advise. The information is

provided as is without any representation, warranty or guarantee of any kind, whether express or implied.

Equifax will not under any circumstances be liable to you or to any other person for any loss or damage

arising from, connected with, or relating to the use of this presentation by you or any other person. Users of

this informational presentation should consult with their own lawyer for legal advice. No part of the contents of

this document may be reproduced or transmitted in any form or by any means for external usage without the

express written authorization of Equifax Canada Co.

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Auto Financing · PDF fileConfidential and Proprietary 3 1 2 The auto financing 3Low oil prices and growing consumer debt Delinquency rates begin trending higher industry remains strong