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.
1
Session overview
Market Overview
 Outstanding balances
 Total risk distributions
 Delinquency
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Originations
 New and Used financing
 Lender and transaction types
 Loan & lease characteristics
2
Overall Automotive Finance Market
A look balances and delinquencies on all open
automotive loans & leases
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33
Loan balances break record highs while Credit Unions
experience largest YOY growth (loans regardless of origination period)
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Source: Experian-Oliver Wyman Market Intelligence Reports
4
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
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Prime
Super Prime
8.42%
8.10%
7.05%
Deep
subprime
Subprime
Nonprime
Prime
Super prime
Source: Experian-Oliver Wyman Market Intelligence Reports
5
30 day delinquency shows increases across all lenders
except Credit Unions (loans and leases regardless of origination period)
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Source: Experian-Oliver Wyman Market Intelligence Reports
6
30-day delinquency balances by state
(loans and leases regardless of origination period)
1.44%
HI = 1.88%
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Source: Experian-Oliver Wyman Market Intelligence Reports
7
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
8
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
9
Originations in Q2 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
26.92%
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
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
3.26%
3.71%
Q2 2015
Q2 2016
Source: Experian Automotive
11
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
12
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
13
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
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
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
14
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.
15
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
16
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
17
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
18
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
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
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
19
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
© 2016 Experian Information Solutions, Inc. All rights reserved. Experian Public.
$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
20
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
21
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
22
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
23
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
24
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
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$370
$372
$384
$390
$384
Prime
Nonprime
Subprime
Deep Subprime
Source: Experian Automotive
25
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
26
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.
27
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.
28