State of the Automotive Finance Market A look at loans and leases in Q3 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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Majority of loan balances remain prime or higher with modest growth in high risk segments (loans regardless of origination period) Risk distribution of open loan balances
Year-over-year balance change 18.58%
26.77%
27.26%
27.36%
29.50%
28.64%
28.44%
9.83% 8.09% 21.45%
21.77%
21.48%
18.12%
18.39%
18.45%
4.15%
3.95% 2015 Q3
4.28%
2014 Q3 Deep Subprime
Subprime
Nonprime
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
8.07%
8.80%
2016 Q3 Prime
Super Prime
Deep subprime
Subprime
Nonprime
Prime
Super prime
Source: Experian-Oliver Wyman Market Intelligence Reports
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30 day delinquency is flat with slight increase in at-risk dollars (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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30-day delinquency balances by state (loans regardless of origination period)
1.75% HI = 1.78%
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
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)
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Source: Experian-Oliver Wyman Market Intelligence Reports
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60-day delinquency balances by state (loans and leases regardless of origination period)
0.35% HI = 0.50%
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Source: Experian-Oliver Wyman Market Intelligence Reports
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Originations in Q3 2016 Trends in automotive loans and leases
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10 10
Automotive financing: snapshot of how and what consumers are financing Percentage of vehicles with financing New
% of all new vehicles that are leased
Used
26.93%
86.6%
86.1% 55.3%
Q3 2015
54.2% Q3 2016
Finance Market: new v used units New
29.49%
Q3 2015
Q3 2016
Used % of lease market
Used
52.02%
52.88%
47.98%
47.12%
Q3 2015
Q3 2016
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
3.34%
3.71%
Q3 2015
Q3 2016 Source: Experian Automotive
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Credit Unions pick up market share across the board (loan and lease units combined) Market Share of New Financing
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4.8%
4.9%
12.0%
51.9% 0.1%
0.1% Captive
Bank
BHPH
Credit Union Finance Co
Captive
16.0%
18.9%
26.4%
24.9%
8.0%
11.5%
Q3 2016
12.0%
10.7%
12.1%
Finance Co
Q3 2015
7.8%
Credit Union
BHPH
Market Share of Used Financing
38.1%
Captive
19.6%
17.6%
Bank
36.3%
BHPH
31.8%
33.1%
28.3%
29.3% 6.2%
6.2% Bank
Q3 2016
Q3 2016
35.1%
34.8%
Q3 2015
Q3 2015
9.9%
(new/used units & loan/lease)
51.2%
Market Share of Total Financing
Credit Union Finance Co Source: Experian Automotive
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Credit scores increase across all transaction types Average new credit scores
Average used credit scores
732 676
672
674
674
648
650
650
678
725 652 723
719 717 716
718 714
655
718 715
714
712 713
607
609
605
603
615
712 710
All New
Q3 2012
Q3 2013
New Loan
Q3 2014
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New Lease
Q3 2015
Q3 2016
All Used Independent Used Q3 2012
Q3 2013
Franchise Used
Q3 2014
Q3 2015
Q3 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.
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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 18.95%
New risk distribution 27.11%
27.77%
44.86%
45.08%
17.69% 9.65%
17.14% 9.31%
Q3 2015
Q3 2016
19.42%
39.67%
40.38%
Used risk distribution 20.08%
19.81%
18.17%
17.35%
3.13%
3.04%
Q3 2015
Q3 2016
Deep Subprime
Subprime
Nonprime
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Prime
Super Prime
11.25% 34.78% 22.33% 26.21% 5.44% Q3 2015
11.89% 36.14% 22.21% 24.60% 5.16% Q3 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 25.97%
% of new borrowers choosing to lease
27.34%
34.6% Prime +
31.4%
48.57%
48.50%
32.2% Nonprime
30.2% 17.66%
16.60%
7.34%
7.03%
Q3 2015
Q3 2016
Deep Subprime
Subprime
Nonprime
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Prime
Deep & Sub
25.1%
Q3 2016
22.8%
Q3 2015
Super Prime Source: Experian Automotive
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Despite more prime consumers shifting to leasing the loan market becomes more prime Total (new & used units) loan risk distribution 17.74%
17.94%
38.15%
38.88%
20.53%
20.44%
20.03%
19.26%
3.56%
3.48%
Q3 2015
Q3 2016
Deep Subprime
Subprime
Nonprime
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Prime
New loan risk distribution 27.57%
27.98%
43.25%
43.37%
17.73% 10.67%
17.42% 10.44%
Q3 2015
Q3 2016
Used loan risk distribution 11.21% 11.85% 34.77% 36.15%
Super Prime
22.38%
22.28%
26.24% 5.40%
24.61% 5.11%
Q3 2015
Q3 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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Q3 2016
14.02%
14.85%
41.56%
42.77%
23.73%
23.29%
18.72%
17.25% Q3 2016
Prime
41.07%
Deep Subprime
37.98%
57.85%
Q3 2015
54.76%
67.81%
65.53%
79.52%
78.74%
91.47%
91.20%
Q3 2015
Used Franchise loan risk distribution
Super Prime
Subprime
Nonprime
Prime
Super Prime
Used Independent loan risk distribution 5.66% 23.28%
6.34% 25.47%
21.03%
21.31%
39.08%
36.60%
10.95%
10.28%
Q3 2015
Q3 2016
Deep Subprime
Subprime
Nonprime
Prime
Super Prime
Source: Experian Automotive
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Average used loan amount reaches record high while new remains over $30k Average loan amount by tier Q3 2016
Independent used
$16,647
Franchise used
$16,190
$19,227
$18,858
$19,227
Q3 2015
$18,866
$30,022
$28,936
Average loan amount
Avg new loan Avg used loan Avg Franchise Avg amount amount used loan Independent amount used loan amount
All Used
$27,696 $31,502 $31,422 $28,082 $25,100
Avg New
Super Prime
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$18,534 $18,579 $16,604 $14,635 $13,679 $21,190 $22,052 $20,958 $18,545 $16,631 $20,221 $20,748 $19,103 $16,430 $14,633
Prime
Nonprime
Subprime
Deep Subprime
Source: Experian Automotive
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New loan term at 68 months with higher terms on the higher risk new loans Average new term Q3 2015
Avg new term by risk tier 35.64
Q3 2016
36.44 New lease
37.00 37.32
68
67
37.42 62.59
35
36
69.45 72.36
New loan
72.43 72.11 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
Q3 2015
61.62 65.45 64.90 61.73 58.12
Q3 2016 All used
65
66 63
58 Franchise used
63
60.19 62.75 60.55 56.78 53.99
Independent used
62.50 66.95 67.88 67.25 65.89
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Independent used
Franchise used
All used Super Prime
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Prime
Nonprime
Subprime
Deep Subprime
Source: Experian Automotive
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Average scores by term rise lease is not included
Average new score by loan term Q3 2015 771
Average used score by loan term
Q3 2016
Q3 2015
Q3 2016
774 752
756 699
700 679
684
682 651
37 - 48
49 - 60
61 - 72
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73 - 84
685 659
657
37 - 48
49 - 60
662
61 - 72
666
670
73 - 84
Source: Experian Automotive
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Longer term loans continue to dominate the market with 85+ reaching nearly 1% of new Percentage of new loans by term Q3 2015
Q3 2016
Percentage of used loans by term Q3 2015
43.5% 40.7%
Q3 2016
41.3% 41.5% 30.7% 27.5%
23.7%
20.6% 20.1%
23.7% 16.2% 17.7%
0.71% 0.98% 49 - 60
61 - 72
73 - 84
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85+
49 - 60
61 - 72
73 - 84 Source: Experian Automotive
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Payments rise on new vehicles while leasing becomes more attractive as payments are $90 lower Average new payment Q3 2015
Avg new payment by risk tier
Q3 2016
$399
$404
$482
New lease
$495
$411 $427
$398
$405
$462 $474 $500 $514
New loan
$511 $495 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 payments also climb Average used payment
Average payment by risk tier
Q3 2015
All used
$355 $355 $362 $377 $380
Independent used
$332 $334 $346 $374 $384
Franchise used
$369 $370 $380 $389 $386
Q3 2016
$374 $375
$360 $362 $349 $351 Franchise used
Independent 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 new rate rises while prime shift to used and overall higher scores results in lower rates in the used market Average rates
11.17%
7.33%
11.69%
Independent used
7.62%
4.69%
4.63%
8.48%
Q3 2016
8.76%
Q3 2015
Average rates by tier 3.45% 5.81% 11.26% 17.58% 20.02% 3.36% 4.90% Franchise used
8.72% 14.23%
17.59% 3.40% 5.12%
All Used
9.47% 15.72% 18.98%
2.60% 3.59% Avg New
6.39% 10.65% 13.53%
Avg new rate Avg used rate
Franchise used rate
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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 drops below 30% of all new consumer vehicle sales as consumers across all risk tiers increasingly choose to lease Originations across all finance types become increasingly more prime and credit scores improve 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 climb while terms continue to extend
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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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