Experian's State of the Automotive Finance Market Q3 · PDF fileSource: Experian-Oliver Wyman...

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Experian Public.

www.experian.com/automotive

State of the Automotive Finance Market

A look at loans and leases in Q3 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 Q3 2017

3 © Experian

A review of all open automotive loans & leases

Overall Automotive Finance Market


4 © Experian

968

1,055

1,121

850

900

950

1,000

1,050

1,100

1,150

2015 Q3 2016 Q3 2017 Q3

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

$331 $358 $370

$242 $250 $256

$234$269 $305

$161$178

$190

$0

$200

$400

$600

$800

$1,000

$1,200

2015 Q3 2016 Q3 2017 Q3

Bill

ion

s

Total open automotive loan balance

All Banks Captive Auto Credit Union Finance


Bill

ions

5 © Experian

3.44% 3.75% 3.87%

15.92% 16.04% 16.06%

19.26% 19.11% 18.72%

41.98% 41.84% 41.71%

19.39% 19.26% 19.63%

2015 Q3 2016 Q3 2017 Q3

Loan balance risk distribution

Deep Subprime Subprime Nonprime Prime Super Prime

Majority of loan balances remain prime or higher with high risk segments creeping toward 20%

9.86%

6.43%

4.12%

5.99%

8.32%

Deepsubprime

Subprime Nonprime Prime Super prime

Year-over-year balance change


6 © Experian

1.97% 2.22%

1.35%

4.58%

2.38%1.99%

2.37%

1.34%

4.39%

2.39%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Bank Captive Credit Union Finance Total

% of loans & leases 30 dpd

2016 Q3 2017 Q3

30 day delinquency rates are improving


1.76%2.67%

1.21%

5.10%

2.40%1.84%

2.85%

1.19%

5.03%

2.43%

0.0%

2.0%

4.0%

6.0%


% of loan balances 30 dpd

2016 Q3 2017 Q3


7 © Experian

Percentage of loan balances 30 dpd

AK = 1.78%

HI = 1.79%


8 © Experian

0.63% 0.50%0.34%

1.78%

0.74%0.66% 0.60%0.33%

1.71%

0.76%

0.0%

0.5%

1.0%

1.5%

2.0%


% of loans & leases 60 dpd

2016 Q3 2017 Q3

60 day delinquency rates continue to deteriorate


0.55% 0.60%0.28%

1.93%

0.72%0.61% 0.69%0.27%

1.95%

0.76%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%


% of loan balances 60 dpd

2016 Q3 2017 Q3


9 © Experian

Percentage of loan balances 60 dpd

AK = 0.47%

HI = 0.52%


10 © Experian

Trends in automotive loan and lease originations

Originations in Q3 2017


11 © Experian

86.1% 85.5%

54.2% 53.1%

Q3 2016 Q3 2017

Percentage of vehicles with financing

New Used

Automotive financing: snapshot of how and what consumers are financing

29.49% 29.14%

Q3 2016 Q3 2017

% of all new vehicles that are leased

47.12% 47.19%

52.88% 52.81%

Q3 2016 Q3 2017

Finance Market: new v used units

New Used

3.71% 3.68%

Q3 2016 Q3 2017

Used % of lease market


12 © Experian

35

.1%

6.2

%

28

.3%

19

.6%

10

.7%

32

.9%

6.1

%

29

.8%

21

.0%

10

.2%

Bank BHPH Captive CreditUnion

Finance Co

Market Share of Total Financing(new/used units & loan/lease)

Q3 2016 Q3 2017

Captives and Credit Unions continue to gain market share (loan and lease units combined)

31

.8%

0.1

%

51

.2%

12

.0%

4.8

%

29.5

%

0.1

%

52

.6%

13

.1%

4.7

%

Bank BHPH Captive Credit Union Finance Co

Market Share of New Financing

Q3 2016 Q3 2017

38

.1%

11.5

%

8.0

% 26

.4%

16

.0%

36.1

%

11.6

%

8.4

% 28

.4%

15

.5%

Bank BHPH Captive Credit Union Finance Co

Market Share of Used Financing

Q3 2016 Q3 2017


13 © 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.


14 © Experian

717714

712714

716719 718

715718

722

716713

710712 713

Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017

Average new credit scores

Credit scores increase across all transaction types

648 650 650 655 659672 674 674 678 682

603 605 609 615 620

Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017

Average used credit scores

Franchise used

All used

Independent used

New lease

All new

New loan


15 © Experian

3.04% 2.79%

17.35% 16.60%

19.81% 19.56%

40.38% 40.90%

19.42% 20.16%

Q3 2016 Q3 2017

Total (new & used units) risk distribution


Total finance (loan & lease) and Used market reach record lows for subprime while prime continues to grow

9.31% 8.84%17.14% 16.83%

45.08% 44.98%

27.77% 28.70%

Q3 2016 Q3 2017

New risk distribution

5.16% 4.68%24.60% 23.47%

22.21% 21.99%

36.14% 37.28%

11.89% 12.58%

Q3 2016 Q3 2017

Used risk distribution


16 © Experian

7.03% 6.34%

16.60% 15.73%

48.50% 48.35%

27.34% 29.16%

Q3 2016 Q3 2017

New lease risk distribution


Leasing becomes increasingly prime while consumers shift slightly more into the loan market

25.1%

32.2%

34.6%

22.4%

29.4%

33.1%

Deep &Sub

Nonprime

Prime +

% of new borrowers choosing to lease

Q3 2017

Q3 2016


17 © Experian

3.48% 3.17%

19.26% 18.35%

20.44% 20.25%

38.88% 39.63%

17.94% 18.60%

Q3 2016 Q3 2017

Total (new & used units) loan risk distribution


Record low for deep subprime in the total and used loan markets

10.44% 9.99%17.42% 17.33%

43.37% 43.44%

27.98% 28.49%

Q3 2016 Q3 2017

New loan risk distribution

5.11% 4.64%24.61% 23.48%

22.28% 22.05%

36.15% 37.29%

11.85% 12.54%

Q3 2016 Q3 2017

Used loan risk distribution


18 © Experian

91

.47

%

79

.52

%

67

.81

%

57

.85

%

41

.07

%

90

.96

%

79

.32

%

67

.49

%

58

.35

%

41

.80

%Deep

SubprimeSubprime Nonprime Prime Super

Prime

Percentage of consumers by risk tier choosing used loans

Q3 2016 Q3 2017

Prime+ borrowers continue to purchase used vehicles; deep subprime in Independent Dealers reaches record low

17.25% 16.04%

23.29% 22.79%

42.77% 43.90%

14.85% 15.66%

Q3 2016 Q3 2017

Used Franchise loan risk distribution


10.28% 9.45%

36.60% 35.61%

21.31% 21.34%

25.47% 26.66%6.34% 6.93%

Q3 2016 Q3 2017

Used Independent loan risk distribution



19 © Experian

Average loan amounts remain high

-$69

$37$175

$427$266 $291

$204

-$5-$122

$13 $35 $56$94

-$149 -$196

$30

-$1

$121$249

$163

-$20

$13$176 $203

Deep Subprime Subprime Nonprime Prime Super Prime Total

Year-over-year change in balance

$2

5,0

31

$2

8,1

19

$3

1,5

97

$3

1,9

29

$2

7,9

63

$3

0,3

29

$1

4,8

37

$1

6,4

25

$1

8,9

81

$2

0,7

61

$2

0,2

55

$1

9,2

91

$1

6,7

25

$1

8,3

96

$2

0,7

62

$2

2,0

82

$21,1

89

$2

1,0

00

$1

3,9

28

$1

4,7

98

$1

6,5

84

$1

8,5

92

$1

8,7

10

$1

6,8

07


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


20 © Experian

71.79 72.45 72.66 70.13 63.66 69.00

36.89 37.00 36.77 36.21 35.33 36.09


Average new term by risk tierNew loan New lease

New loan term at 69 months while higher risk loans see decreases in terms

-0.32

0.010.30

0.681.08

0.60

-0.52 -0.32 -0.23 -0.23 -0.31 -0.29


Year-over-year change in term


21 © Experian

Used loan terms increase

58.52 61.71 64.87 65.51 61.84 63.9565.83 66.96 67.76 66.96 62.65 66.4754.67 57.18 60.64 62.80 60.46 60.08


Average used loan term by tier All Used Franchise used Independent used

0.40

-0.02 -0.03

0.060.21

0.09

-0.05

-0.29-0.12

0.010.15

0.05

0.68

0.40

0.08 0.050.28

0.49


Year-over-year change in used loan term


22 © Experian

20.1%

40.7%30.7%

0.9%

18.7%

43.2%

30.5%

1.0%

49 - 60 61 - 72 73 - 84 85 - 96

Percentage of new loans by term

Q3 2016 Q3 2017

Longer term loans continue to dominate the market

10.0%

23.7%

41.5%

17.7%10.0%

24.0%

41.7%

17.5%

37 - 48 49 - 60 61 - 72 73 - 84

Percentage of used loans by term

Q3 2016 Q3 2017

756

700 682 697

759

702 687 698

49 - 60 61 - 72 73 - 84 85 - 96

Average new score by loan term

Q3 2016 Q3 2017

657685

662 670661688

666 674

37 - 48 49 - 60 61 - 72 73 - 84

Average used score by loan term

Q3 2016 Q3 2017


23 © Experian

$502 $520 $522 $507 $475 $502$435 $438 $419 $410 $406 $412


Average new payment by risk tierNew loan New lease

New payments remain near record highs

$7$9 $8 $7

$1$6

-$27

$11 $8 $6 $7 $6


Year-over-year change in new payment


24 © Experian

$388 $382$365 $358 $358 $365

$393 $393$383

$374 $371$379

$392$381

$351$337 $337

$355


Average used payment by risk tierAll used Franchise used Independent used

Average used payments also climb

$8

$5

$3 $3 $3 $3

$7

$4$2

$4

$2$4

$8$7

$4$3

$5$4


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

13

.95

%

11

.11

% 6.8

3%

3.9

9%

3.0

8%

5.1

0%

19

.38

%

16

.23

% 9.9

8%

5.4

5%

3.7

6% 8.7

2%

18

.06

%

14

.80

% 9.2

8%

5.2

7%

3.7

2%

7.6

1%

20

.39

%

17

.99

% 11

.73

%

6.1

1%

3.8

6%

11

.34

%


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

42 46 44 4048

394051 51

34 3622

4757 55

37 36

18

37 42 48

3141

9


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


26 © Experian

• Portfolio balances reach record levels

• Delinquency increases begin to taper off

• Leasing remains strong at 29% of all new consumer vehicle sales

• 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

• Deep subprime reaches record lows in used lending

• Terms continue to extend and seeing growth in 85+ for new financing

Summary


Experian's State of the Automotive Finance Market Q3 · PDF fileSource: Experian-Oliver Wyman...

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