State of the Automotive Finance Market A look at loans and leases in Q1 2017 Presented by: Melinda Zabritski | Sr. Director, Financial Solutions
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Session overview Market Overview • Outstanding balances • Total risk distributions • Delinquency
Originations • New and Used financing • Lender and transaction types • Loan & lease characteristics
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Experian Public
State of the Automotive Finance Market
Overall Automotive Finance Market A review of all open automotive loans & leases
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Loan balances reach another record high yet experience slowing growth; Credit Unions see highest growth $1,100
$1,082
$1,050
Total open automotive loan balance Billions
Billions
Total open automotive loan balance
$1,200 $1,000
$170 $1,005
$143
$800
$1,000
$249
$215
$600 $950
$286
$230
$244
$252
$318
$343
$363
Q1 2015
Q1 2016
Q1 2017
$400
$905
$180
$900 $200 $850 $0 $800
Q1 2015
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Experian Public
Q1 2016
Q1 2017
All Banks
Captive Auto
Credit Union
Finance
State of the Automotive Finance Market Source: Experian-Oliver Wyman Market Intelligence Reports
Majority of loan balances remain prime or higher with high risk segments remaining below 20% Loan balance risk distribution 20.00%
19.66%
19.74%
42.50%
42.09%
41.70%
Year-over-year balance change 17.52%
9.53% 8.27% 18.97%
19.10%
18.86%
15.38% 3.16% Q1 2015
15.70% 3.45% Q1 2016
15.94%
Deep Subprime
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Subprime
Experian Public
Nonprime
3.76% Q1 2017 Prime
Super Prime
State of the Automotive Finance Market
Deep subprime
Subprime
6.45%
6.83%
Nonprime
Prime
Super prime
30 day delinquency rates are improving % of loans & leases 30 dpd 5.0%
Q1 2016
Q1 2017
3.94%
4.0% 3.0% 2.0%
1.84%
1.71%
1.96%
1.67%
3.77% 2.10%
1.16%
1.96%
1.21%
1.0% 0.0%
Bank
Captive
Credit Union
Finance
Total
% of loan balances 30 dpd 5.0%
Q1 2016
Q1 2017
4.25%
4.14%
4.0% 3.0% 2.0%
1.61%
1.55%
2.26%
2.07%
1.90% 1.03%
1.93%
1.07%
1.0% 0.0%
Bank 6
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Experian Public
Captive
Credit Union
Finance
Total
State of the Automotive Finance Market Source: Experian-Oliver Wyman Market Intelligence Reports
Percentage of loan balances 30 dpd
AK = 1.45% HI = 1.43% 7
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Experian Public
State of the Automotive Finance Market
60 day delinquency rates continue to deteriorate % of loans & leases 60 dpd 2.0%
Q1 2016
Q1 2017 1.42%
1.5% 1.0%
0.55%
0.58%
0.5%
0.42%
0.51%
1.55% 0.61%
0.30%
0.67%
0.31%
0.0%
Bank
Captive
Credit Union
Finance
Total
% of loan balances 60 dpd 2.0%
Q1 2016
Q1 2017
1.44%
1.5% 1.0% 0.5%
0.47%
0.52%
0.47%
1.72%
0.58%
0.58% 0.24%
0.66%
0.25%
0.0%
Bank 8
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Experian Public
Captive
Credit Union
Finance
Total
State of the Automotive Finance Market Source: Experian-Oliver Wyman Market Intelligence Reports
Percentage of loan balances 60 dpd
AK = 0.51% HI = 0.42% 9
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Experian Public
State of the Automotive Finance Market
Originations in Q1 2017 Trends in automotive loan and lease originations
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Automotive financing: snapshot of how and what consumers are financing Percentage of vehicles with financing New
Used
86.3%
Q1 2016
© Experian
31.06%
Q1 2016
Q1 2017
53.3% Q1 2017
Finance Market: new v used units
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31.11%
85.5% 55.3%
New
% of all new vehicles that are leased
Used % of lease market
Used
55.99%
55.23%
44.01%
44.77%
Q1 2016
Q1 2017
Experian Public
State of the Automotive Finance Market
3.98%
3.71%
Q1 2016
Q1 2017
Captives and Credit Unions gain market share across the board (loan and lease units combined)
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BHPH
Experian Public
Captive
4.8%
5.4%
12.4%
53.9%
Captive
Credit Union Finance Co
Finance Co
State of the Automotive Finance Market
Bank
BHPH
Captive
16.8%
19.9%
26.4%
8.3%
7.2%
12.7%
Q1 2017
13.8%
35.6%
35.2%
11.3%
Q1 2016
23.9%
Market Share of Used Financing
13.4%
20.0%
18.0%
Credit Union
BHPH
49.4%
0.2%
28.7%
Q1 2017
Bank
29.3%
26.2% 6.9%
7.7% Bank
34.2%
Q1 2017
32.5%
34.8%
Q1 2016
Q1 2016
0.1%
(new/used units & loan/lease)
10.7%
Market Share of New Financing
Market Share of Total Financing
Credit Union Finance Co
Credit scores increase across all transaction types Average new credit scores
Average used credit scores
730 724 722
721 721
716
718 715
672
671
671
673
644
641
642
645
596
601
717
716
595
593
679 652
610
712 714 New lease All new New loan
13
714
713
Franchise used All used Independent used
710
Q1 2013
Q1 2014
Q1 2015
Q1 2016
Q1 2017
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Experian Public
State of the Automotive Finance Market
Q1 2013
Q1 2014
Q1 2015
Q1 2016
Q1 2017
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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Experian Public
State of the Automotive Finance Market
Total finance market (loan & lease) becomes increasingly prime across all, new and used financing Total (new & used units) risk distribution 17.97%
38.52%
New risk distribution
19.72%
39.67%
27.18%
29.15%
45.04%
44.88%
17.60% 9.52%
16.53% 8.79%
Q1 2016
Q1 2017
Used risk distribution 19.85% 19.83%
19.14% 17.93%
© Experian
12.02%
21.64%
21.27% 25.39% 5.91% Q1 2017
3.83%
3.54%
28.01% 6.34%
Q1 2016
Q1 2017
Q1 2016
Deep Subprime 15
10.66% 33.35%
Experian Public
Subprime
State of the Automotive Finance Market
Nonprime
Prime
Super Prime
35.41%
Leasing remains very prime as more consumers across all risk tiers choose to lease (loans not included) New lease risk distribution 26.76%
% of new borrowers choosing to lease
29.21%
37.4% Prime +
36.3% 48.15%
48.18%
34.1% Nonprime
34.2% 17.18%
15.76%
7.43%
6.44%
Q1 2016
Q1 2017
Deep Subprime
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Subprime
Experian Public
Nonprime
Prime
Super Prime
State of the Automotive Finance Market
Deep & Sub
25.9%
Q1 2017
27.2%
Q1 2016
Subprime reaches 10-year low for the loan market Total (new & used units) loan risk distribution 16.37%
17.91%
36.78%
38.06%
29.12%
43.36%
43.04%
17.83% 10.64%
16.96% 10.10%
Q1 2016
Q1 2017
19.82%
10.63%
11.98%
33.36%
35.42%
22.08%
20.11%
21.70%
21.33%
4.40%
4.10%
Q1 2016
Q1 2017
28.02% 6.29%
25.41% 5.86%
Q1 2016
Q1 2017
Deep Subprime
© Experian
27.40%
Used loan risk distribution
20.37%
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New loan risk distribution
Subprime
Experian Public
Nonprime
Prime
Super Prime
State of the Automotive Finance Market
Prime and Super Prime borrowers choose used vehicles at an increasing rate resulting in shifts among all dealer types Used Franchise loan risk distribution
Deep Subprime
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© Experian
Subprime
Experian Public
Nonprime
Q1 2017
13.92%
15.33%
41.37%
42.67%
23.48%
22.65%
Prime
State of the Automotive Finance Market
43.75%
19.16% Q1 2016 Deep Subprime Subprime
42.73%
60.88%
59.67%
70.40%
70.06%
82.63%
Q1 2016
83.51%
93.43%
93.99%
Percentage of consumers by risk tier choosing used loans
Super Prime
Nonprime
17.42% Q1 2016 Prime Super Prime
Used Independent loan risk distribution 5.12% 21.38% 19.66%
6.22% 23.98% 19.90%
41.35%
37.96%
12.49%
11.94%
Q1 2016 Deep Subprime Subprime
Nonprime
Q1 2017 Prime Super Prime
Average loan amounts reach record highs
Deep Subprime
Subprime
Nonprime
Prime
Super Prime
$16,612
$20,904
$19,126
$30,534
Independent used $18,878
$21,427
$20,461
$28,286
Franchise used $18,605
$22,125
$20,778
All Used $32,153
$16,555
$18,913
$20,711
Avg New $31,840
$14,550
$17,945
$16,026
$28,099
$13,707
$16,151
$24,920
$14,385
Average loan amount by tier
Total
Year-over-year change in balance $469
$654 $336
$484
$623
$616
$492
$353
$209 $272 $107
$122$144
Subprime
Nonprime
$88
$204 $202
$533
$513 $205 $94 $181
$288 $252
-$183
Deep Subprime 19
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Experian Public
State of the Automotive Finance Market
Prime
Super Prime
Total
New loan term creeping toward 69 months with longer terms on the higher risk new loans Average new term by risk tier New loan
72.64
72.55
72.14 37.29
Deep Subprime
37.00
Subprime
69.74 36.92
Nonprime
68.53
62.72 36.35
Prime
New lease
36.21
35.44
Super Prime
Total
Year-over-year change in term 0.53
0.48
0.34
0.21
0.03 Deep Subprime 20
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Subprime
Experian Public
0.65
0.54 0.06
Nonprime
State of the Automotive Finance Market
0.18 Prime
0.29 Super Prime
0.40 0.14 Total
Used loan terms increase Average used loan term by tier 58.28
65.93
54.85
Deep Subprime
All Used
Franchise used
Independent used
61.60 67.03 57.19
64.93 67.86 60.83
65.49 66.98 62.85
61.69 62.51 60.32
63.84 66.50 59.97
Subprime
Nonprime
Prime
Super Prime
Total
Year-over-year change in used loan term 1.69 1.39 1.13 0.78
0.78 0.35
Deep Subprime 21
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Subprime Experian Public
1.16
0.98 0.41 0.33 Nonprime
State of the Automotive Finance Market
0.38 0.22 0.28
0.31 0.37 0.40
Prime
Super Prime
0.50
0.26 Total
Longer term loans continue to dominate the market Percentage of new loans by term Q1 2016 40.2% 38.6%
Percentage of used loans by term Q1 2016
Q1 2017
41.1% 40.2%
31.3% 34.9%
20.5% 17.6%
49 - 60
23.2% 23.4%
61 - 72
73 - 84
0.9% 1.3%
11.0% 10.0%
85 - 96
37 - 48
Average new score by loan term Q1 2016
754 759
49 - 60 22
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699 707
681 684
61 - 72
73 - 84
Experian Public
Q1 2017
Q1 2017 696 701
85 - 96
State of the Automotive Finance Market
49 - 60
17.2%19.5%
61 - 72
73 - 84
Average used score by loan term Q1 2016 644 656
37 - 48
Q1 2017
680 686
657 663
667 667
49 - 60
61 - 72
73 - 84
New payments reach record highs while leasing offers lower payments Average new payment by risk tier $500
$436
Deep Subprime
$519
New loan
$525 $426
Subprime
$513 $416
Nonprime
$409
Prime
$488
New lease
$509 $410
$403
Super Prime
Total
Year-over-year change in new payment $18 $11 $4
$2 -$3
Deep Subprime 23
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Subprime
Experian Public
$6
Nonprime
State of the Automotive Finance Market
$7
$4
Prime
$6
$3
Super Prime
$5
$4
Total
Average used payments also climb Average used payment by risk tier $380 $381 $385
Deep Subprime
$376
$385
$376
All used
$380 $363
Subprime
$373 $348
Franchise used $362
$357
$375
Prime
$364
$377 $354
$339
$335
Nonprime
Independent used
Super Prime
Total
Year-over-year change in used payment $12 $8
$8 $5
$3 $1
Deep Subprime 24
© Experian
Subprime
Experian Public
$
$1
$3
Nonprime
State of the Automotive Finance Market
$1
$3
Prime
$2
$1
$2
$4
Super Prime
$1
$2
Total
$3
Average new rate rises while prime shift to used and overall higher scores results in lower rates in the used market
Deep Subprime
Subprime
Nonprime
Prime
Super Prime
11.67%
7.70%
8.88%
4.87%
Independent used
3.62%
3.53%
3.56%
2.84%
Franchise used
5.94%
5.11%
5.29%
All Used
3.77%
11.56%
9.19%
9.88%
6.60%
Avg New
18.22%
15.04%
16.48%
11.05%
20.55%
18.37%
19.62%
13.98%
Average loan rates by tier
Total
Year-over-year change (bps) in loan rate 42
20 2 (10) (9)
(9)
(9)
9
7
4
3
4
18
9
15
16
16
6
(5)
(9)
(14)
(29)
(35) (62)
Deep Subprime 25
© Experian
Subprime Experian Public
Nonprime
State of the Automotive Finance Market
Prime
Super Prime
Total
Summary • Portfolio balances reach record levels as loan amounts grow to all-time highs • Increases 60-day delinquency rates while 30-day shows improvements • Leasing continues over 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 some payments reach record highs 26
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Experian Public
State of the Automotive Finance Market
