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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

3 © Experian

Overall Automotive Finance Market

A review of all open automotive loans & leases

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


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


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


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%


% of loan balances 30 dpd

2016 Q2 2017 Q2


7 © Experian

Percentage of loan balances 30 dpd

AK = 1.70%

HI = 1.65%


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%


% of loans & leases 60 dpd

2016 Q2 2017 Q2

60 day delinquency rates continue to deteriorate


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%


% of loan balances 60 dpd

2016 Q2 2017 Q2


9 © Experian

Percentage of loan balances 60 dpd

AK = 0.44%

HI = 0.46%


10 © Experian

Originations in Q2 2017

Trends in automotive loan and lease originations

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


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


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


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.


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


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


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


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


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


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


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



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


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


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


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


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


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


Year-over-year change in used loan term


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


23 © Experian

$498 $519 $524 $510 $477 $504$433 $433 $420 $412 $404 $412


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


Year-over-year change in new payment


24 © Experian

$382 $379$366 $359 $359 $365

$382$391 $385

$376 $372$380$387

$377

$351$337 $337

$355


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


Year-over-year change in used payment


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

%


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


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


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


state of the automotive finance market - experian · experian public state of the automotive...

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