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State of the Automotive Finance Market
A look at loans and leases in Q2 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 Q2 2017
4 © Experian
$932
$1,027
$1,100
$800
$850
$900
$950
$1,000
$1,050
$1,100
$1,150
2015 Q2 2016 Q2 2017 Q2
Bill
ions
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
$323 $350 $366
$232 $245 $252
$225$258
$295$153
$174$187
$0
$200
$400
$600
$800
$1,000
$1,200
2015 Q2 2016 Q2 2017 Q2
Bill
ions
Total open automotive loan balance
All Banks Captive Auto Credit Union Finance
Experian Public State of the Automotive Finance Market Q2 2017
5 © Experian
3.24% 3.43% 3.71%
15.70% 15.83% 15.97%
19.00% 19.09% 18.73%
42.51% 42.26% 41.97%
19.55% 19.38% 19.62%
2015 Q2 2016 Q2 2017 Q2
Loan balance risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Majority of loan balances remain prime or higher with high risk segments remaining below 20%
15.93%
8.07%
5.08%6.38%
8.41%
Deepsubprime
Subprime Nonprime Prime Super prime
Year-over-year balance change
Experian Public State of the Automotive Finance Market Q2 2017
6 © Experian
1.87% 2.03%1.26%
4.34%
2.22%1.71%
2.09%1.28%
4.31%
2.20%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Bank Captive Credit Union Finance Total
% of loans & leases 30 dpd
2016 Q2 2017 Q2
30 day delinquency rates are improving
Source: Experian-Oliver Wyman Market Intelligence Reports
1.66%2.47%
1.13%
4.77%
2.25%1.59%
2.59%
1.13%
4.94%
2.26%
0.0%
2.0%
4.0%
6.0%
Bank Captive Credit Union Finance Total
% of loan balances 30 dpd
2016 Q2 2017 Q2
Experian Public State of the Automotive Finance Market Q2 2017
7 © Experian
Percentage of loan balances 30 dpd
AK = 1.70%
HI = 1.65%
Experian Public State of the Automotive Finance Market Q2 2017
8 © Experian
0.52% 0.42% 0.29%
1.49%
0.62%0.59% 0.48%0.29%
1.55%
0.67%
0.0%
0.5%
1.0%
1.5%
2.0%
Bank Captive Credit Union Finance Total
% of loans & leases 60 dpd
2016 Q2 2017 Q2
60 day delinquency rates continue to deteriorate
Source: Experian-Oliver Wyman Market Intelligence Reports
0.45% 0.50%0.24%
1.57%
0.60%0.54% 0.57%0.24%
1.78%
0.68%
0.0%
0.5%
1.0%
1.5%
2.0%
Bank Captive Credit Union Finance Total
% of loan balances 60 dpd
2016 Q2 2017 Q2
Experian Public State of the Automotive Finance Market Q2 2017
9 © Experian
Percentage of loan balances 60 dpd
AK = 0.44%
HI = 0.46%
Experian Public State of the Automotive Finance Market Q2 2017
11 © Experian
86.5% 85.9%
55.9% 53.6%
Q2 2016 Q2 2017
Percentage of vehicles with financing
New Used
Automotive financing: snapshot of how and what consumers are financing
31.44% 30.83%
Q2 2016 Q2 2017
% of all new vehicles that are leased
44.39% 44.21%
55.61% 55.79%
Q2 2016 Q2 2017
Finance Market: new v used units
New Used
3.71% 3.61%
Q2 2016 Q2 2017
Used % of lease market
Experian Public State of the Automotive Finance Market Q2 2017
12 © Experian
34
.8%
7.1
%
27
.7%
18
.7%
11
.6%
32
.3%
7.1
%
28
.6%
20
.3%
11
.6%
Bank BHPH Captive CreditUnion
Finance Co
Market Share of Total Financing(new/used units & loan/lease)
Q2 2016 Q2 2017
Captives and Credit Unions gain market share across the board (loan and lease units combined)
31.7
%
0.2
%
52.2
%
11.4
%
4.6
%
28.8
%
0.2
%
53.2
%
12.7
%
5.1
%
Bank BHPH Captive Credit Union Finance Co
Market Share of New Financing
Q2 2016 Q2 2017
37.3
%
13.0
%
7.4
% 24.9
%
17.5
%
35.2
%
12.9
%
8.1
% 26.7
%
17.0
%
Bank BHPH Captive Credit Union Finance Co
Market Share of Used Financing
Q2 2016 Q2 2017
Experian Public State of the Automotive Finance Market Q2 2017
13 © Experian
720
712 711 710
714
724
717 716 716
722
717
711709 708
711
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017
Average new credit scores
Credit scores increase across all transaction types
645 644 645 648 652
673 672 671 674 673
601 600 603 608 611
Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 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 Q2 2017
14 © 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 Q2 2017
15 © Experian
3.54% 3.45%
19.28% 18.41%
20.28% 19.62%
39.01% 39.41%
17.90% 19.10%
Q2 2016 Q2 2017
Total (new & used units) risk distribution
Total finance market (loan & lease) becomes increasingly prime across all, new and used financing
9.76% 9.32%17.86% 17.05%
44.97% 44.64%
26.72% 28.29%
Q2 2016 Q2 2017
New risk distribution
5.83% 5.67%26.95% 25.71%
22.22% 21.69%
34.20% 35.22%
10.80% 11.72%
Q2 2016 Q2 2017
Used risk distribution
Experian Public State of the Automotive Finance Market Q2 2017
16 © Experian
7.41% 6.59%
17.17% 15.85%
48.10% 48.10%
26.82% 29.02%
Q2 2016 Q2 2017
New lease risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Leasing remains very prime as more consumers across all risk tiers choose to lease (loans not included)
26.5%
33.6%
36.5%
24.5%
32.5%
37.0%
Deep &Sub
Nonprime
Prime +
% of new borrowers choosing to lease
Q2 2017
Q2 2016
Experian Public State of the Automotive Finance Market Q2 2017
17 © Experian
4.06% 3.98%
21.46% 20.57%
20.88% 20.35%
37.34% 37.83%
16.26% 17.27%
Q2 2016 Q2 2017
Total (new & used units) loan risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Subprime remains near-record low for the loan market while deep subprime hits Q2 record low for used loans
11.02% 10.79%18.24% 17.70%
43.29% 42.78%
26.67% 27.89%
Q2 2016 Q2 2017
New loan risk distribution
5.79% 5.63%26.98% 25.71%
22.28% 21.75%
34.20% 35.23%
10.75% 11.68%
Q2 2016 Q2 2017
Used loan risk distribution
Experian Public State of the Automotive Finance Market Q2 2017
18 © Experian
93
.25
%
82
.24
%
69
.79
%
59
.90
%
43
.26
%
92
.74
%
81
.92
%
70
.02
%
61
.02
%
44
.32
%Deep
SubprimeSubprime Nonprime Prime Super
Prime
Percentage of consumers by risk tier choosing used loans
Q2 2016 Q2 2017
Prime+ borrowers choose used vehicles reaches record high; prime distributions across all used dealers increase
18.71% 19.40%
23.78% 22.48%
41.63% 40.86%
13.92% 14.51%
Q2 2016 Q2 2017
Used Franchise loan risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
11.18% 11.28%
39.00% 38.10%
20.78% 20.31%
23.48% 24.17%5.57% 6.14%
Q2 2016 Q2 2017
Used Independent loan risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Experian Public State of the Automotive Finance Market Q2 2017
19 © Experian
Average loan amounts remain high
-$362
$12
$335$558
$300 $338$276
$13
-$120
$43 $49 $81
-$180 -$123 -$112
$135 $114 $194
$537$276
$118 $110 $52$308
Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change in balance
$24,4
87
$2
7,8
53
$31,5
56
$3
1,9
64
$27,7
54
$3
0,2
34
$1
4,6
31
$16,2
40
$1
8,9
92
$2
0,8
47
$2
0,3
30
$19,1
89
$16,1
79
$1
8,2
53
$2
0,8
86
$2
2,2
51
$2
1,2
99
$2
1,0
14
$13,9
38
$14,7
27
$16,6
17
$18,6
80
$1
8,7
58
$1
6,7
15
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 Q2 2017
20 © Experian
72.07 72.49 72.66 69.94 62.94 68.80
36.88 36.98 36.80 36.24 35.35 36.12
Deep Subprime Subprime Nonprime Prime Super Prime Total
Average new term by risk tierNew loan New lease
New loan term creeping toward 69 months with longer terms on the higher risk new loans
0.13 0.24 0.42 0.610.96
0.520.06
-0.18 -0.06 -0.01 -0.02 -0.07Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change in term
Experian Public State of the Automotive Finance Market Q2 2017
21 © Experian
Used loan terms increase
58.95 61.78 64.98 65.61 61.86 63.9866.09 67.28 68.02 67.17 62.71 66.7255.27 57.33 60.80 62.93 60.55 60.09
Deep Subprime Subprime Nonprime Prime Super Prime Total
Average used loan term by tier All Used Franchise used Independent used
1.03
0.310.12 0.13
0.29 0.240.300.10 0.05 0.11
0.27 0.23
1.59
0.89
0.530.33
0.47
0.88
Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change in used loan term
Experian Public State of the Automotive Finance Market Q2 2017
22 © Experian
20.99%
39.57%31.28%
0.95%
18.55%
40.40%32.50%
1.25%
49 - 60 61 - 72 73 - 84 85 - 96
Percentage of new loans by term
Q2 2016 Q2 2017
Longer term loans continue to dominate the market
10.45%
23.59%
41.05%
16.13%9.99%
23.05%
41.59%
17.69%
37 - 48 49 - 60 61 - 72 73 - 84
Percentage of used loans by term
Q2 2016 Q2 2017
753
695 679 693
757
699 682 699
49 - 60 61 - 72 73 - 84 85 - 96
Average new score by loan term
Q2 2016 Q2 2017
648680
656 668655685
661 668
37 - 48 49 - 60 61 - 72 73 - 84
Average used score by loan term
Q2 2016 Q2 2017
Experian Public State of the Automotive Finance Market Q2 2017
23 © Experian
$498 $519 $524 $510 $477 $504$433 $433 $420 $412 $404 $412
Deep Subprime Subprime Nonprime Prime Super Prime Total
Average new payment by risk tierNew loan New lease
New payments remain near record highs
$3
$7 $8 $7
$1
$5
$11$9 $9 $8 $8 $8
Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change in new payment
Experian Public State of the Automotive Finance Market Q2 2017
24 © Experian
$382 $379$366 $359 $359 $365
$382$391 $385
$376 $372$380$387
$377
$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
$5$2
$ $2 $1 $1
-$2
$1 $1$4 $2 $3
$12$8
$3 $2 $4 $3
Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change in used payment
Experian Public State of the Automotive Finance Market Q2 2017
25 © Experian
Average new rate rises while prime shift to used and overall higher scores results in lower rates in the used market
14
.43
%
11
.35
% 6.9
2%
3.9
6%
3.0
5%
5.2
0%
19
.73
%
16
.49
% 10
.06
%
5.4
2%
3.6
8% 9.0
2%
18.6
8%
15
.14
% 9.3
6%
5.2
4%
3.6
5%
7.8
8%
20.6
0%
18.1
4% 11
.79
%
6.0
9%
3.7
8%
11
.70
%
Deep Subprime Subprime Nonprime Prime Super Prime Total
Average loan rates by tier Avg New All Used Franchise used Independent used
106
76
4327
40 3644 39 28 19 284
5643 33 23 29
9
3926 18 13
30
-7
Deep Subprime Subprime Nonprime Prime Super Prime Total
Year-over-year change (bps) in loan rate
Experian Public State of the Automotive Finance Market Q2 2017
26 © Experian
• Portfolio balances reach record levels
• 30 day delinquency seeing improvement with 60-day increases tapering off for some lending segments
• Leasing continues over 30% of all new consumer vehicle sales as consumers across all risk tiers increasingly choose to lease
• 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
• Terms continue to extend and seeing growth in 85+ for new financing
Summary
Experian Public State of the Automotive Finance Market Q2 2017