State of the Automotive Finance Market A look at loans and leases in Q2 2016 Presented by: Melinda Zabritski | Sr. Director, Financial Solutions www.experian.com/automotive © 2016 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. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. Experian Public.
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Session overview
Market Overview Outstanding balances Total risk distributions Delinquency
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Originations New and Used financing Lender and transaction types Loan & lease characteristics
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Overall Automotive Finance Market A look balances and delinquencies on all open automotive loans & leases © 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
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Loan balances break record highs while Credit Unions experience largest YOY growth (loans regardless of origination period)
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Source: Experian-Oliver Wyman Market Intelligence Reports
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Unit distribution remains stable with growth occurring across all risk segments (loans and leases regardless of origination period) Risk distribution of open loans & leases
Year-over-year volume change 11.86%
35.49%
35.89%
36.02%
8.03% 28.00%
27.62%
27.37%
17.81%
17.77%
17.78%
15.43%
15.44%
15.44%
3.27% 2014 Q2
3.28% 2015 Q2
3.40% 2016 Q2
Deep Subprime
Subprime
Nonprime
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Prime
Super Prime
8.42%
8.10% 7.05%
Deep subprime
Subprime
Nonprime
Prime
Super prime
Source: Experian-Oliver Wyman Market Intelligence Reports
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30 day delinquency shows increases across all lenders except Credit Unions (loans and leases regardless of origination period)
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Source: Experian-Oliver Wyman Market Intelligence Reports
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30-day delinquency balances by state (loans and leases regardless of origination period)
1.44% HI = 1.88%
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Source: Experian-Oliver Wyman Market Intelligence Reports
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60 day delinquency growth across all lender types (loans and leases regardless of origination period)
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Source: Experian-Oliver Wyman Market Intelligence Reports
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60-day delinquency balances by state (loans and leases regardless of origination period)
0.32% HI = 0.48%
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Source: Experian-Oliver Wyman Market Intelligence Reports
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Originations in Q2 2016 Trends in automotive loans and leases
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Automotive financing: snapshot of how and what consumers are financing Percentage of vehicles with financing New
% of all new vehicles that are leased
Used
26.92%
86.5%
85.8% 55.5%
Q2 2015
55.9%
Q2 2016
Finance Market: new v used units New
31.44%
Q2 2015
Q2 2016
Used % of lease market
Used 54.30%
55.61%
45.70%
44.39%
Q2 2015
Q2 2016
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3.26%
3.71%
Q2 2015
Q2 2016 Source: Experian Automotive
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Credit Unions pick up market share across the board while Finance companies show decreases (loan and lease units combined) Market Share of New Financing
Captive
4.6%
5.5%
11.4%
10.3%
Credit Union Finance Co
Bank
BHPH
Captive
17.5%
20.2%
24.9%
23.3%
7.4%
7.7%
13.0%
Q2 2016
13.6%
11.6%
13.4%
Finance Co
Q2 2015
37.3%
Credit Union
0.2%
0.2%
31.7%
34.0%
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
18.7%
17.2% Captive
BHPH
Market Share of Used Financing
35.3%
BHPH
Bank
27.7%
27.3% 7.1%
7.4% Bank
Q2 2016
Q2 2016
34.8%
34.7%
Q2 2015
Q2 2015
52.2%
(new/used units & loan/lease)
50.0%
Market Share of Total Financing
Credit Union Finance Co Source: Experian Automotive
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Independent used Dealers experience higher cash penetration caused by more subprime and older MY vehicles Financing by dealer type 39.34%
Franchise
Independent
21.75%
19.02%
40.05%
19.46% 15.94%
12.19%
10.14% 0.70%
BANK
12.45%
BUY HERE/PAY HERE
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
8.61% 0.35%
CAPTIVE
CREDIT UNION
FINANCE
NO LENDER LISTED Source: Experian Automotive
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Credit scores stabilize for new while used scores increase Average new credit scores
Average used credit scores
732
724
674
673
672
671
674
647
645
644
645
648
600
603
724 720
722
717 717
712
716 711
716 602 710
601
608
711 709 All New
Q2 2012
Q2 2013
New Loan
Q2 2014
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708
New Lease
Q2 2015
Q2 2016
All Used Independent Used Q2 2012
Q2 2013
Franchise Used
Q2 2014
Q2 2015
Q2 2016
Source: Experian Automotive
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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.
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
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Total finance market (loan & lease) becomes increasingly more prime across all, new and used financing Total (new & used units) risk distribution
New risk distribution 26.79%
26.72%
44.69%
44.97%
17.86% 9.97%
17.86% 9.76%
Q2 2015
Q2 2016
17.90%
18.07%
38.54%
39.01%
Used risk distribution 20.10%
20.28%
19.76%
19.28%
3.54%
3.54%
Q2 2015
Q2 2016
Deep Subprime
Subprime
Nonprime
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Prime
Super Prime
10.56% 33.24%
10.80% 34.20%
22.03%
22.22%
28.19% 6.00%
26.95% 5.83%
Q2 2015
Q2 2016
Source: Experian Automotive
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Leasing remains very prime as more consumers across all risk tiers choose to lease (loans not included) New lease risk distribution 26.36%
%of new borrowers choosing leasing
26.82%
36.5% Prime +
31.9% 48.48%
48.10%
33.6% Nonprime
29.8% 17.50%
17.17%
7.24%
7.41%
Q2 2015
Q2 2016
Deep Subprime
Subprime
Nonprime
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Prime
Deep & Sub
26.5%
Q2 2016
21.9%
Q2 2015
Super Prime Source: Experian Automotive
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Loan market appears more subprime as prime consumers defect to leasing Total (new & used units) loan risk distribution 16.26%
16.73%
37.34%
36.95%
20.55%
20.88%
21.78%
21.46%
4.00%
4.06%
Q2 2015
Q2 2016
Deep Subprime
Subprime
Nonprime
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Prime
New loan risk distribution 26.98%
26.67%
43.04%
43.29%
18.02% 11.17%
18.24% 11.02%
Q2 2015
Q2 2016
Used loan risk distribution 10.54% 10.75% 33.27% 34.20%
Super Prime
22.08%
22.28%
28.17% 5.93%
26.98% 5.79%
Q2 2015
Q2 2016
Source: Experian Automotive
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Prime and Super Prime borrowers choose used vehicles at an increasing rate resulting in shifts among all dealer types Percentage of consumers by risk tier choosing used loans
Deep Subprime
Subprime
Nonprime
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Prime
Q2 2016
13.59%
13.92%
40.68%
41.63%
23.72%
23.78%
19.92%
18.71%
Q2 2015
Q2 2016
43.26%
Deep Subprime
39.32%
59.90%
56.18%
69.79%
67.01%
82.24%
80.71%
93.25%
92.57%
Q2 2015
Used Franchise loan risk distribution
Super Prime
Subprime
Nonprime
Prime
Super Prime
Used Independent loan risk distribution 5.12% 21.59% 20.26%
5.57% 23.48% 20.78%
41.24% 11.78%
39.00% 11.18%
Q2 2015
Q2 2016
Deep Subprime
Subprime
Nonprime
Prime
Super Prime
Source: Experian Automotive
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Average used loan amount reaches record high while new drops below $30k Average loan amount by tier Q2 2016
Independent used
$16,456
Franchise used
$16,108
$20,940
$20,426
$19,101
Q2 2015
$18,671
$29,880
$28,524
Average loan amount
Avg new loan Avg used loan Avg Franchise Avg amount amount used loan Independent amount used loan amount
All Used
$27,454 $31,406 $31,222 $27,841 $24,849
Avg New
Super Prime
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$18,705 $18,570 $16,498 $14,451 $13,402 $21,185 $22,115 $20,998 $18,376 $16,359 $20,281 $20,804 $19,112 $16,227 $14,356
Prime
Nonprime
Subprime
Deep Subprime
Source: Experian Automotive
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New loan term at 68 months with higher terms on the small high risk, lower loan amounts in sub and deep subprime Average new term Q2 2015
Avg new term by risk tier 35.37
Q2 2016
36.26 New lease
36.85 37.15
68
67
36.82 61.98
36
36
69.33 72.23
New loan
72.25 71.94 New loan
New lease Super Prime
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Prime
Nonprime
Subprime
Deep Subprime
Source: Experian Automotive
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Used terms rise as more prime consumers, who have longer terms, choose used vehicles Average used term
Average term by risk tier
Q2 2015
61.58 65.48 64.86 61.47 57.91
Q2 2016 All used
65
66 62 58
Franchise used
63
60.08 62.60 60.27 56.43 53.69
Independent used
62.44 67.06 67.97 67.18 65.79
59
Independent used
Franchise used
All used Super Prime
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Prime
Nonprime
Subprime
Deep Subprime
Source: Experian Automotive
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Average scores by term stabilize and increase lease is not included
Average new score by loan term Q2 2015 772
Average used score by loan term
Q2 2016
Q2 2015
Q2 2016
770 751
753 695
695 677
680
679 646
37 - 48
49 - 60
61 - 72
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73 - 84
680 656
648
37 - 48
49 - 60
656
61 - 72
662
668
73 - 84
Source: Experian Automotive
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Payments rise on new vehicles while leasing becomes more attractive Average new payment Q2 2015
Avg new payment by risk tier
Q2 2016
$397
$404
$483
$499
New lease
$411 $424
$394
$404
$422 $477 $503 $516
New loan
$512 $494 New loan © 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
New lease
Super Prime
Prime
Nonprime
Subprime
Deep Subprime
Source: Experian Automotive
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Average used payment reaches record high of $364 Average used payment
Average payment by risk tier
Q2 2015
$375
All used
$358 $357 $366 $376 $376
Independent used
$336 $335 $347 $371 $377
Q2 2016
$378 $361
$364
$351 $352 Franchise used
Independent used
Franchise used
All used Super Prime
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
$370 $372 $384 $390 $384
Prime
Nonprime
Subprime
Deep Subprime
Source: Experian Automotive
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Average new rate rises while prime shift to used results in lower rates in the used market Average rates
11.69%
12.07%
Independent used
7.68%
7.95%
4.82%
4.81%
8.97%
Q2 2016
9.13%
Q2 2015
Average rates by tier 3.46% 5.94% 11.57% 17.82% 20.17% 3.36% 4.98% Franchise used
8.96% 14.57%
18.01% 3.41% 5.23%
All Used
9.78% 16.10% 19.29%
2.64% 3.70% Avg New
6.49% 10.59% 13.37%
Avg new rate Avg used rate
Franchise used rate
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Independent used rate
Super Prime
Prime
Nonprime
Subprime
Deep Subprime
Source: Experian Automotive
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Summary Portfolio balances reach record levels as loan amounts grow to all-time highs Increases in both 30 & 60-day delinquency rates rise as the percentage of loans in the subprime portion of open portfolios grow
Leasing continues to surpass 30% of all new consumer vehicle sales as consumers across all risk tiers increasingly choose to lease Prime consumers also increasing choosing used vehicles resulting in score increases, greater percentages of used financing in the prime risk tier and lower average used rates Loan amounts and payments reach all-time highs for new loans while terms continue to extend
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
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Insights about the market, the vehicles and the people who buy them www.experian.com/automotive © 2016 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. ©2016 Experian Information Solutions, Inc. All rights reserved. Experian Public. Experian Public.
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