State of the Auto Finance Market - experian.com · 2.7 million out of 89 million active automotive...

1 © Experian

State of the AutomotiveFinance Market

Presented by: Melinda ZabritskiQ4 2018

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 Q4 2018

3 © Experian

A review of all open automotive loans & leases

Overall Automotive Finance Market


4 © Experian

$1,072

$1,129

$1,178

$1,000

$1,020

$1,040

$1,060

$1,080

$1,100

$1,120

$1,140

$1,160

$1,180

$1,200

2016 Q4 2017 Q4 2018 Q4

Bill

ion

s

Total open automotive loan balance

Loan balances reach another record high with growth across all lender types; Credit Unions maintain double-digit growth

Source: Experian-Oliver Wyman Market Intelligence Reports

$364.3 $368.3 $368.2

$252.0 $258.5 $262.1

$276.8 $313.0 $346.3

$179.0$189.3

$201.7

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2016 Q4 2017 Q4 2018 Q4

Bill

ion

s

Total open automotive loan balance

Banks Captive Credit Union Finance


8.6%

5.3%

4.4%

5 © Experian

3.98% 3.77% 3.83%

16.41% 16.11% 15.86%

19.25% 18.96% 18.50%

41.64% 42.00% 42.19%

18.72% 19.17% 19.62%

2016 Q4 2017 Q4 2018 Q4

Loan balance risk distribution

Deep Subprime Subprime Nonprime Prime Super Prime

Percentage of subprime remains below 20% of loan balances with increased balances across all risk segments

6.04%

2.75%

1.86%

4.84%

6.81%

Deepsubprime

Subprime Nonprime Prime Super prime

Year-over-year balance change


6 © Experian

82.7

86.5

89.1

78

80

82

84

86

88

90

2016 Q4 2017 Q4 2018 Q4

Mill

ion

s

Number of open automotive loans and leases

2.7 million out of 89 million active automotive loans and leases are either 30 or 60 days delinquent


2.02 2.04 2.06

0.65 0.65 0.70

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2016 Q4 2017 Q4 2018 Q4

Mill

ion

s

Number of automotive loans and leases that are 30 or 60 DPD

30 DPD 60 DPD

+3%+4.5%

+0.96%

+1.18%

+6.23%

+1.08%

7 © Experian

1.82%2.39%

1.34%

4.48%

2.36%2.00% 2.38%

1.28%

4.06%

2.32%

Bank Captive Credit Union Finance Total

% of loans & leases 30 dpd2017 Q4 2018 Q4

30 day delinquency rates improve for all but banks


1.66%

2.92%

1.17%

5.12%

2.39%1.85%

2.89%

1.10%

4.63%

2.34%


% of loan balances 30 dpd 2017 Q4 2018 Q4


8 © Experian

Percentage of loan balances 30 dpd


AK = 1.26%

HI = 2.03%

9 © Experian

0.61% 0.61%0.34%

1.73%

0.76%0.75% 0.62%0.33%

1.65%

0.78%

Banks Captive Credit Union Finance Total

% of loans & leases 60 dpd 2017 Q4 2018 Q4

60 day delinquency up YOY with improvements in Credit Unions and Finance Companies


0.56% 0.71%0.27%

1.97%

0.75%0.70% 0.73%0.26%

1.87%

0.78%


% of loan balances 60 dpd 2017 Q4 2018 Q4


10 © Experian

Percentage of loan balances 60 dpd


AK = 0.49%

HI = 0.57%

11 © Experian

Trends in automotive loan and lease originations

Originations in Q4 2018


12 © Experian

85.1% 85.1%

53.8% 53.6%

Q4 2017 Q4 2018

Percentage of vehicles with financing

New Used

Automotive financing1: snapshot of how and what consumers are financing

28.28% 28.76%

Q4 2017 Q4 2018

% of all2 new vehicles that are leased

47.39% 46.44%

52.61% 53.56%

Q4 2017 Q4 2018

Finance Market: new v used units

New Used

4.06% 4.35%

Q4 2017 Q4 2018

Used % of lease market


1 Financing = either a loan or lease is present on the title; 2 All = loan, lease or cash

13 © Experian

32

.2%

6.4

%

29

.9%

21

.1%

10

.4%

30

.7%

6.1

%

30

.6%

21

.3%

11

.2%

Bank BHPH Captive CreditUnion

Finance Co

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

Q4 2017 Q4 2018

Market share shifting away from banks(loan and lease units combined)

29

.4%

0.1

%

52

.4%

13

.4%

4.7

%

26

.2%

0.1

%

54

.7%

13

.6%

5.3

%

Bank BHPH Captive Credit Union Finance Co

Market Share of New Financing

Q4 2017 Q4 2018

34

.8%

12

.4%

8.6

%

28

.4%

15

.8%

34

.8%

11.6

%

8.7

%

28

.4%

16

.6%

Bank BHPH Captive Credit Union Finance Co

Market Share of Used Financing

Q4 2017 Q4 2018


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

Credit scores show year-over-year improvement

648 649654 656 659

672 673 677 681 681

603 607614 617 619

Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q4 2018

Average used credit scores

Franchise used

All used

Independent used


712711 711

713

715

714

712

714

716

718717

715

720

722

724

Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q4 2018

Average new credit scores

New lease

All new

New loan

16 © Experian

Overall modest shifts in total financing while used reached record lows in subprime

8.77% 8.85%16.83% 16.25%

45.22% 44.61%

28.58% 29.60%

Q4 2017 Q4 2018

New (loan/lease) risk distribution

4.92% 4.82%24.37% 23.66%

22.20% 21.78%

36.55% 37.13%

11.97% 12.61%

Q4 2017 Q4 2018

Used (loan/lease) risk distribution


2.86% 2.89%

16.93% 16.75%

19.64% 19.20%

40.68% 40.63%

19.89% 20.54%

Q4 2017 Q4 2018

Total (loan & lease/new & used units) risk distribution


17 © Experian

3.27% 3.30%

18.82% 18.58%

20.39% 19.92%

39.31% 39.31%

18.22% 18.88%

Q4 2017 Q4 2018

Total (new & used units) loan risk distribution


Subprime hits a Q4 low for total and used loans; super prime grows across both new and used lending

9.89% 10.05%17.36% 16.70%

43.72% 42.97%

28.33% 29.49%

Q4 2017 Q4 2018

New loan risk distribution

4.88% 4.79%24.39% 23.67%

22.27% 21.85%

36.55% 37.13%

11.90% 12.55%

Q4 2017 Q4 2018

Used loan risk distribution


18 © Experian

91

.92

%

79

.80

%

67

.27

%

57

.25

%

40

.23

%

90

.94

%

79

.79

%

68

.68

%

59

.16

%

41

.64

%Deep

SubprimeSubprime Nonprime Prime Super

Prime

Percentage of consumers by risk tier choosing used loans

Q4 2017 Q4 2018

Continued trend of prime consumers choosing used vehicles

16.42% 16.48%

23.22% 22.73%

43.58% 43.52%

15.13% 15.48%

Q4 2017 Q4 2018

Used Franchise loan risk distribution


9.81% 9.78%

36.76% 35.94%

21.23% 21.10%

25.71% 26.33%6.50% 6.84%

Q4 2017 Q4 2018

Used Independent loan risk distribution



19 © Experian

6.40% 6.37%

15.71% 15.32%

48.37% 48.03%

29.09% 29.82%

Q4 2018 Q4 2018

New lease risk distribution


Leasing shifts into more prime segments as consumers choose leasing at greater rates than 2017

23.4%

30.0%

33.8%

23.2%

30.6%

34.1%

Deep &Sub

Nonprime

Prime +

% of new borrowers choosing to lease

Q4 2018

Q4 2017


20 © Experian

3.8%3.2% 2.9%

2.5% 2.4% 2.4% 2.3% 2.3%1.9% 1.9%

EQUINOX RAV4 CIVIC GRANDCHEROKEE

ROGUE 1500 F150 ACCORD CHEROKEE ESCAPE

Top 10 new leased models by market share

CUVs and Trucks comprise the majority of the top leased models with average lease savings of $138


$445 $459 $420

$604 $465

$650 $652

$485 $492 $434 $304 $346 $314

$463$346

$441 $450$376 $357 $329

EQUINOX RAV4 CIVIC GRANDCHEROKEE

ROGUE 1500 F150 ACCORD CHEROKEE ESCAPE

Loan v lease monthly payment comparison on top leased modelsLoan payment Lease payment

21 © Experian

$460$447

$435 $428 $426 $430

$471 $471$456

$447 $442 $448

Deep Subprime Subprime Nonprime Prime Super Prime Total

Average new lease paymentQ4 2017 Q4 2018

Leasing payments also rise while terms remain at 36 months


37.36 37.25 37.06 36.46

35.51

36.33 36.85 36.89 36.83

36.29

35.32

36.12


Average new lease term

22 © Experian

Record highs for average loan amounts; average used loans surpass $20k

$888 $802 $768 $792

$390

$623$742

$648

$445 $397 $396$488

$911$767

$525$421 $385

$492$601

$495$382 $446

$342$466


Year-over-year change in balance

$2

6,4

20

$2

9,4

05

$3

3,1

30

$3

3,5

18

$2

9,1

20

$3

1,7

22

$1

5,6

05

$1

7,2

06

$1

9,7

92

$2

1,5

59

$2

1,0

51

$2

0,0

77

$1

7,5

86

$19,3

42

$2

1,7

09

$2

2,9

33

$2

2,0

29

$2

1,8

67

$1

4,6

23

$1

5,4

26

$1

7,2

35

$19,3

07

$1

9,3

76

$1

7,4

68


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


23 © Experian

New loan term decreases; used terms increase

72.42 72.85 73.02 69.8962.82

68.7359.67 62.38 65.25 65.82 62.02 64.3665.93 67.29 68.04 67.16

62.68 66.6756.43 58.09 61.28 63.38 61.00 60.86


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

0.36 0.33 0.25

-0.24

-0.88

-0.33

1.23

0.650.33 0.26 0.13

0.360.69

0.39 0.32 0.260.07

0.25

1.26

0.65 0.44 0.51 0.47 0.58


Year-over-year change in used loan term


24 © Experian

18.5%

44.0%

30.0%

1.0%

20.6%

40.3%30.3%

1.0%

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

Percentage of new loans by term

Q4 2017 Q4 2018

Longer term loans continue to dominate the market however new loans saw growth in shorter terms

10.0%

23.8%

41.8%

17.9%9.7%

23.2%

42.3%

18.4%

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

Percentage of used loans by term

Q4 2017 Q4 2018

759

702 687 699

759

702 683 700

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

Average new score by loan term

Q4 2017 Q4 2018

659687

663 674663690

664 675

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

Average used score by loan term

Q4 2017 Q4 2018


25 © Experian

$544 $559 $564 $552 $517 $545$407 $403 $388 $379 $379 $387$417 $420 $409 $397 $394 $403$408 $397 $370 $354 $354 $373


Average monthly payment by risk tier New All used Franchise used Independent used

Payments hit highs; franchise used surpass $400

$35 $33$30 $31 $29 $30

$17$18 $17 $15 $15 $16

$24 $24$20

$16 $15$18

$14 $13 $14 $14$10 $13


Year-over-year change in payments


26 © Experian

Gap between new and franchise used payments widen


$137$156

$176 $173$138

$158$126 $139 $155 $155

$124$142


Gap between new and used paymentsGap between new and used

Gap between new and Franchise used

$18$15 $13

$16$14 $14

$11 $9 $10

$15 $14$12


YOY change in payment gap

27 © Experian

New rates pass 6% for the first time in 10 years1

4.8

8%

12

.17

% 7.9

1%

5.0

1%

4.1

9%

6.1

3%

19

.62

%

16

.78

% 10

.91

%

6.3

8%

4.6

9% 9.5

9%

18

.55

%

15.6

2% 1

0.2

9%

6.2

4%

4.6

9%

8.6

4%

20

.56

%

18

.33

% 12

.61

%

6.9

9%

4.7

4% 1

2.0

6%


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

112 118 11299 102 102

3051

90 89 8975

45

77

105 95 93 96

28 31

78 85 83

58


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


28 © Experian

• Q4 continues a series of record highs for loan balances with all lenders experiencing growth

• 30 day delinquency improves YOY; 60 day sees increases

• Overall delinquency trending upward due to prior subprime originations

• Leasing continues to be a highly sought product with growth in prime segments

• Credit scores increase with majority of growth in super prime segments

• Loan amounts hit record highs with monthly payments reaching highs driven by rate increases

Summary


State of the Auto Finance Market - experian.com · 2.7 million out of 89 million active automotive...

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