State of the Automotive Finance Market - experian.com · 14 © Experian Credit scores show year-over-year improvement 644 645 645 652 655 672 671 674 673 680 600 603 608 611 616 Q2

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Experian Public.

www.experian.com/automotive

State of the Automotive Finance Market

A look at loans and leases in Q2 2018

Presented by: Melinda Zabritski | Sr. Director, Financial Solutions

2 © Experian

Market Overview

• Outstanding balances

• Total risk distributions

• Delinquency

Originations

• New and Used financing

• Lender and transaction types

• Loan & lease characteristics

Session overview

Experian Public State of the Automotive Finance Market Q2 2018

3 © Experian

A review of all open automotive loans & leases

Overall Automotive Finance Market


4 © Experian

$1,027

$1,100

$1,149

$960

$980

$1,000

$1,020

$1,040

$1,060

$1,080

$1,100

$1,120

$1,140

$1,160

2016 Q2 2017 Q2 2018 Q2

Bill

ion

s

Total open automotive loan balance

Loan balances reach another record high-yet experience slowing growth; Credit Unions see highest growth

Source: Experian-Oliver Wyman Market Intelligence Reports

$350 $366 $367

$245 $252 $260

$258 $295 $329

$174$187

$192

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2016 Q2 2017 Q2 2018 Q2

Bill

ion

s

Total open automotive loan balance

Banks Captive Credit Union Finance


10.1%

7.1%

4.4%

5 © Experian

3.43% 3.71% 3.32%

15.83% 15.97% 15.49%

19.09% 18.73% 18.53%

42.26% 41.97% 42.66%

19.38% 19.62% 20.01%

2016 Q2 2017 Q2 2018 Q2

Loan balance risk distribution

Deep Subprime Subprime Nonprime Prime Super Prime

Percentage of subprime shrinks falls below 19% of loan balances as both deep subprime and subprime fall

-6.64%

1.28%

3.32%

6.15% 6.52%

Deepsubprime

Subprime Nonprime Prime Super prime

Year-over-year balance change


6 © Experian

1.71% 2.08%1.27%

4.31%

2.20%1.88% 2.14%1.18%

3.67%

2.11%

0.0%

2.0%

4.0%

6.0%

Bank Captive Credit Union Finance Total

% of loans & leases 30 dpd2017 Q2 2018 Q2

30 day delinquency rates are beginning to improve


1.59%2.59%

1.13%

4.94%

2.26%1.75%

2.63%

1.03%

4.18%

2.15%

0.0%

2.0%

4.0%

6.0%


% of loan balances 30 dpd2017 Q2 2018 Q2


7 © Experian

Percentage of loan balances 30 dpd


AK = 1.68%

HI = 1.71%

8 © Experian

0.59% 0.48%0.29%

1.54%

0.67%0.63% 0.52%0.26%

1.32%

0.64%

0.0%

0.5%

1.0%

1.5%

2.0%

Banks Captive Credit Union Finance Total

% of loans & leases 60 dpd2017 Q2 2018 Q2

60 day delinquency rate increases begin to taper off


0.54% 0.57%0.24%

1.78%

0.68%0.58% 0.60%

0.21%

1.49%

0.63%

0.0%

0.5%

1.0%

1.5%

2.0%


% of loan balances 60 dpd2017 Q2 2018 Q2


9 © Experian

Percentage of loan balances 60 dpd


AK = 0.61%

HI = 0.47%

10 © Experian

Trends in automotive loan and lease originations

Originations in Q2 2018

11 © Experian

85.9% 86.1%

53.6% 54.7%

Q2 2017 Q2 2018

Percentage of vehicles with financing

New Used

Automotive financing: snapshot of how and what consumers are financing

30.83% 30.41%

Q2 2017 Q2 2018

% of all new vehicles that are leased

44.21% 44.84%

55.79% 55.16%

Q2 2017 Q2 2018

Finance Market: new v used units

New Used

3.61% 3.55%

Q2 2017 Q2 2018

Used % of lease market


12 © Experian

32

.3%

7.1

%

28

.6%

20

.3%

11

.6%

31

.6%

6.9

%

29

.0%

21

.3%

11

.1%

Bank BHPH Captive CreditUnion

Finance Co

Market Share of Total Financing(new/used units & loan/lease)

Q2 2017 Q2 2018

Credit Unions driving increases in market share(loan and lease units combined)

28

.8%

0.2

%

53

.2%

12

.7%

5.1

%

26

.1%

0.1

%

54

.2%

14

.3%

5.2

%

Bank BHPH Captive Credit Union Finance Co

Market Share of New Financing

Q2 2017 Q2 2018

35

.2%

12

.9%

8.1

% 26

.7%

17

.0%

33

.7%

12

.6%

8.3

% 28

.8%

16

.7%

Bank BHPH Captive Credit Union Finance Co

Market Share of Used Financing

Q2 2017 Q2 2018


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

644 645 645652 655

672 671 674 673680

600 603608 611

616

Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018

Average used credit scores

Franchise used

All used

Independent used


711

709708

711 711

712711

710

714715

717716 716

722 722

Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018

Average new credit scores

New lease

All new

New loan

15 © Experian

Used financing shifts to prime originations drive overall financing Q2 lows for subprime and deep subprime

9.32% 9.45%17.05% 16.88%

44.64% 44.60%

28.29% 28.35%

Q2 2017 Q2 2018

New (loans/leases) risk distribution

5.67% 5.02%25.71% 25.03%

21.69% 22.00%

35.22% 36.10%

11.72% 11.85%

Q2 2017 Q2 2018

Used (loans/leases) risk distribution


3.45% 3.09%

18.41% 18.02%

19.62% 19.70%

39.41% 39.92%

19.10% 19.27%

Q2 2017 Q2 2018

Total (new & used units on loans and leases) risk distribution


16 © Experian

6.59% 6.47%

15.85% 15.77%

48.10% 48.31%

29.02% 29.01%

Q2 2017 Q2 2018

New lease risk distribution


Leasing remains very prime while more consumers shift into the loan space

24.5%

32.5%

37.0%

23.1%

31.8%

36.1%

Deep &Sub

Nonprime

Prime +

% of new borrowers choosing to lease

Q2 2018

Q2 2017


17 © Experian

3.98% 3.54%

20.57% 20.10%

20.35% 20.44%

37.83% 38.41%

17.27% 17.51%

Q2 2017 Q2 2018

Total (new & used units) loan risk distribution


Q2 record lows in used with new loans growing higher risk financing

10.79% 10.98%17.70% 17.46%

42.78% 42.67%

27.89% 28.02%

Q2 2017 Q2 2018

New loan risk distribution

5.63% 5.00%25.71% 25.05%

21.75% 22.05%

35.23% 36.09%

11.68% 11.80%

Q2 2017 Q2 2018

Used loan risk distribution


18 © Experian

92

.74

%

81

.92

%

70

.02

%

61

.02

%

44

.32

%

91

.35

%

80

.76

%

69

.92

%

60

.88

%

43

.65

%Deep

SubprimeSubprime Nonprime Prime Super

Prime

Percentage of consumers by risk tier choosing used loans

Q2 2017 Q2 2018

Prime consumers shift slightly away from used vehicles yet used subprime financing remains at record lows

19.40% 17.06%

22.48% 22.88%

40.86% 43.13%

14.51% 15.13%

Q2 2017 Q2 2018

Used Franchise loan risk distribution


11.28% 9.76%

38.10% 36.99%

20.31% 21.09%

24.17% 25.65%6.14% 6.51%

Q2 2017 Q2 2018

Used Independent loan risk distribution



19 © Experian

Record highs for average used loan amounts

$881

$451$616

$742$883

$724

$498$400 $456 $522 $486 $520

$795

$478 $480 $449 $448 $504

$265 $242$337

$459 $499 $438

Deep Subprime Subprime Nonprime Prime Super Prime Total

Year-over-year change in balance

$2

5,3

68

$2

8,3

04

$3

2,1

72

$3

2,7

06

$2

8,6

37

$3

0,9

58

$1

5,1

30

$1

6,6

39

$1

9,4

48

$2

1,3

69

$2

0,8

16

$1

9,7

08

$1

6,9

74

$18,7

31

$2

1,3

66

$2

2,6

99

$2

1,7

47

$2

1,5

18

$1

4,2

03

$1

4,9

69

$1

6,9

54

$19,1

39

$1

9,2

57

$1

7,1

53


Average loan amount by tier Avg New All Used Franchise used Independent used


20 © Experian

72.06 72.59 72.81 69.89 62.79 68.80

37.00 37.12 36.91 36.29 35.42 36.19


Average new term by risk tier New loan New lease

New loan term stays stable with prime and super prime decreasing term YOY

-0.01

0.100.16

-0.05

-0.15

0.00

0.12 0.14 0.110.05 0.08 0.07


Year-over-year change in term


21 © Experian

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

59.09 61.93 65.29 66.02 62.17 64.3365.62 67.12 68.18 67.38 62.90 66.8455.32 57.34 61.08 63.41 61.00 60.47


Average used loan term by tier All Used Franchise used Independent used

0.14 0.150.31 0.41 0.31 0.36

-0.47

-0.16

0.16 0.22 0.19 0.120.05 0.010.27

0.48 0.45 0.38


Year-over-year change in used loan term


22 © Experian

18.5%

40.4%32.5%

1.3%

19.4%

40.2%32.0%

1.2%

49 - 60 61 - 72 73 - 84 85 - 96

Percentage of new loans by term

Q2 2017 Q2 2018

Longer term loans continue to dominate the market

10.0%

23.2%

41.5%

18.5%9.9%

22.9%

41.9%

18.8%

37 - 48 49 - 60 61 - 72 73 - 84

Percentage of used loans by term

Q2 2017 Q2 2018

757

699 682 699

757

699 680702

49 - 60 61 - 72 73 - 84 85 - 96

Average new score by loan term

Q2 2017 Q2 2018

655685

661 668656686

662 672

37 - 48 49 - 60 61 - 72 73 - 84

Average used score by loan term

Q2 2017 Q2 2018


23 © Experian

$524 $540 $543 $530 $498 $525$458 $454 $440 $429 $425 $431


Average new payment by risk tier New loan New lease

New monthly payments hit $525 hitting all time high

$26$21 $19 $20 $21 $20

$25$22 $20 $18 $20 $19


Year-over-year change in new payment


24 © Experian

$395 $392$379 $372 $371 $378

$404 $407 $399$388 $385 $394$397

$386

$362$348 $348

$365


Average used payment by risk tier All used Franchise used Independent used

Average used payments also reach record highs

$13 $13 $14 $13 $12 $13

$21$16 $14

$12 $13 $13$9 $9 $11 $11 $11 $10


Year-over-year change in used payment


25 © Experian

Gap between new and franchise used payments widen


$129$148 $164 $158

$127$147

$120 $132 $144 $141$113

$131


Gap between new and used paymentsGap between new and used

Gap between new and Franchise used

$9 $9 $9

$6

$3

$6$7 $7

$9

$7

$4$6


YOY change in payment gap

26 © Experian

Rates rise across the entire automotive loan market1

4.9

3%

12

.14

% 7.5

5%

4.4

5%

3.4

7%

5.7

6%

19

.51

%

16

.72

% 10

.63

%

5.9

4%

4.1

9% 9.4

0%

18

.49

%

15.4

9% 9.8

9%

5.7

5%

4.1

8%

8.2

8%

20

.34

%

18

.21

% 12

.38

%

6.6

3%

4.3

0%

11

.87

%


Average loan rates by tier Avg New All Used Franchise used Independent used

50

7963

48 4256

-23

24

57 52 5138

-19

3553 52 53

40

-26

7

59 54 52

17


Year-over-year change (bps) in loan rate


27 © Experian

• Q2 continues a series of record highs for loan balances with credit unions maintaining double digit growth

• Overall delinquency improves driven by reductions in the credit union and finance company space

• Leasing remains over 30% of all new consumer vehicle sales yet decreases YOY

• Credit scores improve as lending continues to shift into more prime segments

• Subprime reaches Q2 record lows driven primarily by lows in used financing

• Loan amounts remain high with payments rising as interest rates increase

Summary


Documents

State of the Automotive Finance Market - experian.com · 14 © Experian Credit scores show year-over-year improvement 644 645 645 652 655 672 671 674 673 680 600 603 608 611 616 Q2