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Experian Public.
www.experian.com/automotive
State of the Automotive Finance Market
A look at loans and leases in Q3 2017
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 Q3 2017
3 © Experian
A review of all open automotive loans & leases
Overall Automotive Finance Market
Experian Public State of the Automotive Finance Market Q3 2017
4 © Experian
968
1,055
1,121
850
900
950
1,000
1,050
1,100
1,150
2015 Q3 2016 Q3 2017 Q3
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
$331 $358 $370
$242 $250 $256
$234$269 $305
$161$178
$190
$0
$200
$400
$600
$800
$1,000
$1,200
2015 Q3 2016 Q3 2017 Q3
Bill
ion
s
Total open automotive loan balance
All Banks Captive Auto Credit Union Finance
Experian Public State of the Automotive Finance Market Q3 2017
Bill
ions
5 © Experian
3.44% 3.75% 3.87%
15.92% 16.04% 16.06%
19.26% 19.11% 18.72%
41.98% 41.84% 41.71%
19.39% 19.26% 19.63%
2015 Q3 2016 Q3 2017 Q3
Loan balance risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Majority of loan balances remain prime or higher with high risk segments creeping toward 20%
9.86%
6.43%
4.12%
5.99%
8.32%
Deepsubprime
Subprime Nonprime Prime Super prime
Year-over-year balance change
Experian Public State of the Automotive Finance Market Q3 2017
6 © Experian
1.97% 2.22%
1.35%
4.58%
2.38%1.99%
2.37%
1.34%
4.39%
2.39%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Bank Captive Credit Union Finance Total
% of loans & leases 30 dpd
2016 Q3 2017 Q3
30 day delinquency rates are improving
Source: Experian-Oliver Wyman Market Intelligence Reports
1.76%2.67%
1.21%
5.10%
2.40%1.84%
2.85%
1.19%
5.03%
2.43%
0.0%
2.0%
4.0%
6.0%
Bank Captive Credit Union Finance Total
% of loan balances 30 dpd
2016 Q3 2017 Q3
Experian Public State of the Automotive Finance Market Q3 2017
7 © Experian
Percentage of loan balances 30 dpd
AK = 1.78%
HI = 1.79%
Experian Public State of the Automotive Finance Market Q3 2017
8 © Experian
0.63% 0.50%0.34%
1.78%
0.74%0.66% 0.60%0.33%
1.71%
0.76%
0.0%
0.5%
1.0%
1.5%
2.0%
Bank Captive Credit Union Finance Total
% of loans & leases 60 dpd
2016 Q3 2017 Q3
60 day delinquency rates continue to deteriorate
Source: Experian-Oliver Wyman Market Intelligence Reports
0.55% 0.60%0.28%
1.93%
0.72%0.61% 0.69%0.27%
1.95%
0.76%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Bank Captive Credit Union Finance Total
% of loan balances 60 dpd
2016 Q3 2017 Q3
Experian Public State of the Automotive Finance Market Q3 2017
9 © Experian
Percentage of loan balances 60 dpd
AK = 0.47%
HI = 0.52%
Experian Public State of the Automotive Finance Market Q3 2017
10 © Experian
Trends in automotive loan and lease originations
Originations in Q3 2017
Experian Public State of the Automotive Finance Market Q3 2017
11 © Experian
86.1% 85.5%
54.2% 53.1%
Q3 2016 Q3 2017
Percentage of vehicles with financing
New Used
Automotive financing: snapshot of how and what consumers are financing
29.49% 29.14%
Q3 2016 Q3 2017
% of all new vehicles that are leased
47.12% 47.19%
52.88% 52.81%
Q3 2016 Q3 2017
Finance Market: new v used units
New Used
3.71% 3.68%
Q3 2016 Q3 2017
Used % of lease market
Experian Public State of the Automotive Finance Market Q3 2017
12 © Experian
35
.1%
6.2
%
28
.3%
19
.6%
10
.7%
32
.9%
6.1
%
29
.8%
21
.0%
10
.2%
Bank BHPH Captive CreditUnion
Finance Co
Market Share of Total Financing(new/used units & loan/lease)
Q3 2016 Q3 2017
Captives and Credit Unions continue to gain market share (loan and lease units combined)
31
.8%
0.1
%
51
.2%
12
.0%
4.8
%
29.5
%
0.1
%
52
.6%
13
.1%
4.7
%
Bank BHPH Captive Credit Union Finance Co
Market Share of New Financing
Q3 2016 Q3 2017
38
.1%
11.5
%
8.0
% 26
.4%
16
.0%
36.1
%
11.6
%
8.4
% 28
.4%
15
.5%
Bank BHPH Captive Credit Union Finance Co
Market Share of Used Financing
Q3 2016 Q3 2017
Experian Public State of the Automotive Finance Market Q3 2017
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.
Experian Public State of the Automotive Finance Market Q3 2017
14 © Experian
717714
712714
716719 718
715718
722
716713
710712 713
Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017
Average new credit scores
Credit scores increase across all transaction types
648 650 650 655 659672 674 674 678 682
603 605 609 615 620
Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017
Average used credit scores
Franchise used
All used
Independent used
New lease
All new
New loan
Experian Public State of the Automotive Finance Market Q3 2017
15 © Experian
3.04% 2.79%
17.35% 16.60%
19.81% 19.56%
40.38% 40.90%
19.42% 20.16%
Q3 2016 Q3 2017
Total (new & used units) risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Total finance (loan & lease) and Used market reach record lows for subprime while prime continues to grow
9.31% 8.84%17.14% 16.83%
45.08% 44.98%
27.77% 28.70%
Q3 2016 Q3 2017
New risk distribution
5.16% 4.68%24.60% 23.47%
22.21% 21.99%
36.14% 37.28%
11.89% 12.58%
Q3 2016 Q3 2017
Used risk distribution
Experian Public State of the Automotive Finance Market Q3 2017
16 © Experian
7.03% 6.34%
16.60% 15.73%
48.50% 48.35%
27.34% 29.16%
Q3 2016 Q3 2017
New lease risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Leasing becomes increasingly prime while consumers shift slightly more into the loan market
25.1%
32.2%
34.6%
22.4%
29.4%
33.1%
Deep &Sub
Nonprime
Prime +
% of new borrowers choosing to lease
Q3 2017
Q3 2016
Experian Public State of the Automotive Finance Market Q3 2017
17 © Experian
3.48% 3.17%
19.26% 18.35%
20.44% 20.25%
38.88% 39.63%
17.94% 18.60%
Q3 2016 Q3 2017
Total (new & used units) loan risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Record low for deep subprime in the total and used loan markets
10.44% 9.99%17.42% 17.33%
43.37% 43.44%
27.98% 28.49%
Q3 2016 Q3 2017
New loan risk distribution
5.11% 4.64%24.61% 23.48%
22.28% 22.05%
36.15% 37.29%
11.85% 12.54%
Q3 2016 Q3 2017
Used loan risk distribution
Experian Public State of the Automotive Finance Market Q3 2017
18 © Experian
91
.47
%
79
.52
%
67
.81
%
57
.85
%
41
.07
%
90
.96
%
79
.32
%
67
.49
%
58
.35
%
41
.80
%Deep
SubprimeSubprime Nonprime Prime Super
Prime
Percentage of consumers by risk tier choosing used loans
Q3 2016 Q3 2017
Prime+ borrowers continue to purchase used vehicles; deep subprime in Independent Dealers reaches record low
17.25% 16.04%
23.29% 22.79%
42.77% 43.90%
14.85% 15.66%
Q3 2016 Q3 2017
Used Franchise loan risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
10.28% 9.45%
36.60% 35.61%
21.31% 21.34%
25.47% 26.66%6.34% 6.93%
Q3 2016 Q3 2017
Used Independent loan risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Experian Public State of the Automotive Finance Market Q3 2017
19 © Experian
Average loan amounts remain high
-$69
$37$175
$427$266 $291
$204
-$5-$122
$13 $35 $56$94
-$149 -$196
$30
-$1
$121$249
$163
-$20
$13$176 $203
Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change in balance
$2
5,0
31
$2
8,1
19
$3
1,5
97
$3
1,9
29
$2
7,9
63
$3
0,3
29
$1
4,8
37
$1
6,4
25
$1
8,9
81
$2
0,7
61
$2
0,2
55
$1
9,2
91
$1
6,7
25
$1
8,3
96
$2
0,7
62
$2
2,0
82
$21,1
89
$2
1,0
00
$1
3,9
28
$1
4,7
98
$1
6,5
84
$1
8,5
92
$1
8,7
10
$1
6,8
07
Deep Subprime Subprime Nonprime Prime Super Prime Total
Average loan amount by tier Avg New All Used Franchise used Independent used
Experian Public State of the Automotive Finance Market Q3 2017
20 © Experian
71.79 72.45 72.66 70.13 63.66 69.00
36.89 37.00 36.77 36.21 35.33 36.09
Deep Subprime Subprime Nonprime Prime Super Prime Total
Average new term by risk tierNew loan New lease
New loan term at 69 months while higher risk loans see decreases in terms
-0.32
0.010.30
0.681.08
0.60
-0.52 -0.32 -0.23 -0.23 -0.31 -0.29
Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change in term
Experian Public State of the Automotive Finance Market Q3 2017
21 © Experian
Used loan terms increase
58.52 61.71 64.87 65.51 61.84 63.9565.83 66.96 67.76 66.96 62.65 66.4754.67 57.18 60.64 62.80 60.46 60.08
Deep Subprime Subprime Nonprime Prime Super Prime Total
Average used loan term by tier All Used Franchise used Independent used
0.40
-0.02 -0.03
0.060.21
0.09
-0.05
-0.29-0.12
0.010.15
0.05
0.68
0.40
0.08 0.050.28
0.49
Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change in used loan term
Experian Public State of the Automotive Finance Market Q3 2017
22 © Experian
20.1%
40.7%30.7%
0.9%
18.7%
43.2%
30.5%
1.0%
49 - 60 61 - 72 73 - 84 85 - 96
Percentage of new loans by term
Q3 2016 Q3 2017
Longer term loans continue to dominate the market
10.0%
23.7%
41.5%
17.7%10.0%
24.0%
41.7%
17.5%
37 - 48 49 - 60 61 - 72 73 - 84
Percentage of used loans by term
Q3 2016 Q3 2017
756
700 682 697
759
702 687 698
49 - 60 61 - 72 73 - 84 85 - 96
Average new score by loan term
Q3 2016 Q3 2017
657685
662 670661688
666 674
37 - 48 49 - 60 61 - 72 73 - 84
Average used score by loan term
Q3 2016 Q3 2017
Experian Public State of the Automotive Finance Market Q3 2017
23 © Experian
$502 $520 $522 $507 $475 $502$435 $438 $419 $410 $406 $412
Deep Subprime Subprime Nonprime Prime Super Prime Total
Average new payment by risk tierNew loan New lease
New payments remain near record highs
$7$9 $8 $7
$1$6
-$27
$11 $8 $6 $7 $6
Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change in new payment
Experian Public State of the Automotive Finance Market Q3 2017
24 © Experian
$388 $382$365 $358 $358 $365
$393 $393$383
$374 $371$379
$392$381
$351$337 $337
$355
Deep Subprime Subprime Nonprime Prime Super Prime Total
Average used payment by risk tierAll used Franchise used Independent used
Average used payments also climb
$8
$5
$3 $3 $3 $3
$7
$4$2
$4
$2$4
$8$7
$4$3
$5$4
Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change in used payment
Experian Public State of the Automotive Finance Market Q3 2017
25 © Experian
Average new rate rises while prime shift to used and overall higher scores results in lower rates in the used market
13
.95
%
11
.11
% 6.8
3%
3.9
9%
3.0
8%
5.1
0%
19
.38
%
16
.23
% 9.9
8%
5.4
5%
3.7
6% 8.7
2%
18
.06
%
14
.80
% 9.2
8%
5.2
7%
3.7
2%
7.6
1%
20
.39
%
17
.99
% 11
.73
%
6.1
1%
3.8
6%
11
.34
%
Deep Subprime Subprime Nonprime Prime Super Prime Total
Average loan rates by tier Avg New All Used Franchise used Independent used
42 46 44 4048
394051 51
34 3622
4757 55
37 36
18
37 42 48
3141
9
Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change (bps) in loan rate
Experian Public State of the Automotive Finance Market Q3 2017
26 © Experian
• Portfolio balances reach record levels
• Delinquency increases begin to taper off
• Leasing remains strong at 29% of all new consumer vehicle sales
• Credit scores improve as lending continues to shift into more prime segments
• Prime consumers also increasing choosing used vehicles resulting in score increases and greater percentage of prime loans
• Deep subprime reaches record lows in used lending
• Terms continue to extend and seeing growth in 85+ for new financing
Summary
Experian Public State of the Automotive Finance Market Q3 2017