AUTOMOTIVE INDUSTRY INSIGHTS Finance Market Report · 2020. 8. 31. · Throughout her career with Experian, Zabritski has overseen the product strategy for Experian Automotive’slending

1 © Experian

©2020 Experian Information Solutions, Inc. All rights reserved. Experian and the Experian marks used herein are

trademarks 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,

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Experian Public.

Finance Market Report

Presented by

Melinda Zabritski

AUTOMOTIVE INDUSTRY INSIGHTS

Q2 2020

2 © Experian

Today’s speaker

Throughout her career with Experian, Zabritski has overseen

the product strategy for Experian Automotive’s lending

channel and creation of the automotive credit vertical. After

over 18 years in product management, she transitioned into

sales and consulting. Zabritski also serves as Experian’s

primary analyst and spokesperson regarding key automotive

finance trends.

Melinda Zabritski

Sr. Director of Automotive Financial Solutions

Experian

Experian Public. State of the Automotive Finance Market Q2 2020

3 © Experian

Session overview

Origination trends

• Overall financing

• New loans & leases

• Used financing

Monthly insights

• COVID-19 impact on financing

• Lender market share

• Financing trends


4 © Experian

Q2 2020 Originations

Trends in automotive loan andlease originations


5 © Experian

Automotive financing1

Snapshot of how and what consumers are financing

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


6 © Experian

Over 73% of current + 8MY vehicles have financing


7 © Experian

16.09%

14.33%

14.12%

12.50%

8.73%

4.34%

3.98%

3.92%

2.89%

2.89%

2.14%

1.95%

1.87%

1.18%

1.02%

Full-Pickup-Non luxury

Small-SUV-Non luxury

Mid-Size-Sedan-Non luxury

Mid-Size-SUV-Non luxury

Small-Sedan-Non luxury

Mid-Size-Pickup-Non luxury

Mid-Size-SUV-Luxury

Full-SUV-Non luxury

Mid-Size-Minivan-Non luxury

Small-Hatchback-Non luxury

Mid-Size-Sedan-Luxury

Small-Sedan-Luxury

Sport-Coupe-Non luxury

Full-SUV-Luxury

Full-Sedan-Luxury

What are consumers purchasing? Full-sized pick-ups have moved back to the top spot


8 © Experian

Captives, BHPH and Finance Companies gain share


34.8%32.3% 30.2% 32.7%

30.2%

7.1% 7.1% 6.8% 6.7% 7.6%

27.7% 28.6% 29.5% 28.6%

31.1%

18.7%20.3%

22.1%19.8%

18.7%

11.6% 11.6% 11.4% 12.2% 12.4%

Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020

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

Bank

BHPH

Captive

Credit Union

Finance Co

9 © Experian

3.44% 6.38% 3.63% 3.54% 3.54% 3.45% 3.09% 3.12% 2.73%

20.05%23.85%

19.65% 19.76% 19.28% 18.41% 18.02% 17.99% 17.86%

17.66%

19.92%

19.77% 20.10% 20.28% 19.62% 19.70% 19.51% 19.44%

36.85%

32.76%38.78% 38.54% 39.01% 39.41% 39.92% 39.74% 40.96%

22.00%17.09% 18.17% 18.07% 17.90% 19.10% 19.27% 19.63% 19.01%

Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020

Total1 financing by risk segment

Deep subprime Subprime Nonprime Prime Super prime

Higher risk segments reach an 8-year Q1 low


1Total financing = loan and lease transactions on both new and used vehicles

10 © Experian

5.11% 5.25% 5.25% 4.36% 3.64% 3.77% 4.09% 4.04% 4.00% 4.06% 3.98% 3.54% 3.53% 2.98%

24.47% 21.86% 18.20% 18.17% 19.70% 21.56% 24.23% 21.40% 21.78% 21.46% 20.57% 20.10% 19.88% 19.20%

17.76%16.92%

15.59% 16.04% 17.40%18.13%

19.30%20.16% 20.55% 20.88% 20.35% 20.44% 20.23% 20.05%

34.53%35.63%

37.62% 37.90% 37.46% 36.17%34.31% 37.41% 36.95% 37.34% 37.83% 38.41% 38.45% 40.25%

18.13% 20.34% 23.33% 23.53% 21.81% 20.37% 18.07% 16.99% 16.73% 16.26% 17.27% 17.51% 17.91% 17.53%

Q2 2007 Q2 2008 Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020

Total1 loan by risk segment


Deep subprime loans fall under 3% for the first time


1Total financing = loan transactions on both new and used vehicles

11 © Experian

New financing

A look at new lease & loan trends

12 © Experian

31.7%28.8%

26.1%28.0%

23.9%

52.2% 53.2% 54.2% 54.8%

61.2%

11.4% 12.7% 14.3%11.8% 10.2%

4.6% 5.1% 5.2% 5.2% 4.6%

Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020

Market Share of New Financing (loan/lease)

Bank

Captive

Credit Union

Finance Co

Captives show large share increase for new financing


13 © Experian

708

711 711713

718

710

714715

717

721

716

722 722724

729

Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020

Average new credit scores

Credit scores see sharp increase for new financing

8/28/2020 Experian Public. State of the Automotive Finance Market Q2 2020

New lease

All new

New loan

14 © Experian

6.41% 5.55%

15.35% 14.13%

47.69% 47.61%

30.10% 32.41%

Q2 2019 Q2 2020

New lease risk distribution

Deep Subprime Subprime Nonprime Prime Super Prime

Subprime leasing takes a sharp decrease to only 5.8% while leasing share among risk segments also drops

23.5%

30.7%

34.8%

18.3%

21.4%

25.5%

Deep & Sub

Nonprime

Prime +

% of new borrowers choosing to lease

Q2 2020

Q2 2019


Deep subprime =

0.29%

(down 35%)

15 © Experian

Michigan and the Northeast have the greatest share of new state financing as lease


16 © Experian

Top 20 new makes that are leased


17 © Experian

Finance type among top 20 leased new makes


18 © Experian

$419 $459 $508

$650

$479 $452

$666$578

$663$574

$291$369 $381

$465$363 $336

$449 $475 $491$402

CIVIC CR-V RAV4 1500 ACCORD EQUINOX F150 GRANDCHEROKEE

EXPLORER TACOMA

Loan vs. lease monthly payment comparison on top leased models Loan payment

Lease payment

Mix of car, truck and CUV make up the top 10 most leased vehicles with average payment difference of $102

4.5%

2.8% 2.7%2.3% 2.3% 2.2% 2.2% 2.1% 1.9% 1.8%

CIVIC CR-V RAV4 1500 ACCORD EQUINOX F150 GRANDCHEROKEE

EXPLORER TACOMA

Top 10 new leased models by market share


19 © Experian

$486 $480$466 $457 $450 $458

$509

$476 $473 $463 $467 $467

Deep Subprime Subprime Nonprime Prime Super Prime Total

Average new lease paymentQ2 2019 Q2 2020

Leasing payments also rise while terms decrease slightly

37.2337.46 37.40

36.96

35.98

36.76

37.35 37.2137.40

36.92

35.87

36.66


Average new lease term


20 © Experian

New subprime loans are at an 8-year low


1.09% 0.81% 0.38% 0.31% 0.32% 0.45% 0.49% 0.64% 0.79% 0.79% 0.84% 0.87% 0.76% 0.37%

13.90% 11.25%6.48% 6.54% 8.02% 9.65% 9.95% 10.49% 11.17% 11.02% 10.79% 10.98% 10.28% 8.01%

15.58%14.63%

12.08% 12.37% 13.75% 14.68% 16.21% 17.69% 18.02% 18.24% 17.70% 17.46% 17.06%16.67%

41.01%41.86%

43.61% 43.65%43.42%

42.72% 42.70%43.82% 43.04% 43.29% 42.78% 42.67% 43.03% 46.63%

28.42% 31.44%37.44% 37.13% 34.49% 32.49% 30.66% 27.36% 26.98% 26.67% 27.89% 28.02% 28.86% 28.33%

Q2 2007 Q2 2008 Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020

New loans by risk segment


21 © Experian

$28,991$32,284

$36,912 $37,866$33,690

$36,072

DeepSubprime

Subprime Nonprime Prime Super Prime Total

Average loan amount by tier

Record high new loan amounts drive increased payments


$2,277$2,489

$3,202$3,819

$4,548$3,953

DeepSubprime


Year-over-year change in loan amount

$562$579

$591$574

$541

$568

DeepSubprime


Average monthly payment by risk tier

$16$12

$17 $15

$26

$18

DeepSubprime


Year-over-year change in payments

22 © Experian

72.46 73.3074.28

73.04

66.88

71.54

DeepSubprime


Average loan term by tier

Average new term reaches record high while rates decrease


0.120.40

1.07

2.57

3.71

2.37

DeepSubprime


Year-over-year change in new loan term

13.97%11.33%

7.14%4.21% 3.24%

5.15%

DeepSubprime


Average loan rates by tier

-73-87

-98 -96 -99-112

DeepSubprime


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

23 © Experian

19.7%

40.6%

31.1%

1.3%

15.7%

39.9%

35.1%

4.8%

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

Percentage of new loans by term

Q2 2019 Q2 2020

73+ month terms grow along with higher average credit scores for longer term new loans


758

701683

703

762

712698

720

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

Average new score by loan term

Q2 2019 Q2 2020

24 © Experian

Used financing

A look at used automotive loan trends

25 © Experian

Market share growth for all but credit unions and banks in used financing


37.3%35.2%

33.7%

36.4%34.8%

13.0% 12.9% 12.6% 11.9%13.0%

7.4% 8.1% 8.3% 8.1%9.2%

24.9%26.7%

28.8%

26.1%24.9%

17.5% 17.0% 16.7% 17.6% 18.0%

Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020

Market Share of Used Financing (loan/lease)

Bank

BHPH

Captive

Credit Union

Finance Co

26 © Experian

Tennessee leads with the largest percentage of loans for used cars; Vermont has the lowest


27 © Experian

648 652 655 656 657

674 673680 680 682

608 611616 617 615

Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020

Average used credit scores

Used scores show steady increase


Franchise used

All used

Independent used

28 © Experian

Deep subprime used loans fall to record lows


7.83% 8.09% 7.98% 6.83% 5.76% 6.00% 6.25% 6.18% 5.93% 5.79% 5.63% 5.00% 4.93% 4.35%

31.63% 28.64% 24.79% 25.25% 27.14% 29.54% 32.78%28.30% 28.17% 26.98% 25.71% 25.05% 24.72% 25.09%

19.23%18.37%

17.56% 18.27% 19.73%20.44%

21.16%21.72% 22.08% 22.28% 21.75% 22.05% 21.83% 21.83%

30.15%31.66%

34.26% 34.40% 33.65%31.78%

29.29% 33.36% 33.27% 34.20% 35.23% 36.09% 36.14% 36.90%

11.17% 13.25% 15.41% 15.24% 13.72% 12.24% 10.53% 10.44% 10.54% 10.75% 11.68% 11.80% 12.38% 11.84%

Q2 2007 Q2 2008 Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020

Used loans by risk segment


29 © Experian

93

.43

%

83

.82

%

72

.86

%

64.1

4%

47

.61

%

95

.76

%

85

.62

%

71

.34

%

60

.07

%

44

.26

%

DeepSubprime

Subprime Nonprime Prime Super Prime

Percentage of consumers by risk tier choosing used loans

Q2 2019 Q2 2020

Higher scoring consumers shift back into new vehicles

17.15% 16.44%

22.67% 23.01%

42.82% 44.30%

15.52% 15.01%

Q2 2019 Q2 2020

Used Franchise loan risk distribution


9.87% 9.21%

36.79% 38.84%

21.09% 20.89%

25.59% 25.04%

6.66% 6.02%

Q2 2019 Q2 2020

Used Independent loan risk distribution



Deep subprime =

1.24%

(down 33%)

30 © Experian

Overall & Franchise used loan amounts reach record high; YOY amounts decrease for higher risk segments

-$303 -$37

$523

$971$1,149

$760

-$300-$35

$567$997 $1,095

$819

-$322-$87

$320$742

$1,121

$408


Year-over-year change in loan amount

$15,468$17,180

$20,449

$22,743 $22,350$20,916

$17,192$19,179

$22,346$24,111

$23,246 $22,741

$14,555$15,458

$17,747

$20,247 $20,575

$17,993


Average loan amount by tierAll Used Franchise used Independent used


31 © Experian

$414 $410$401

$390 $389 $397$419 $422 $419

$406 $402$411$415

$404$382

$364 $364$383


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

Used payments increase YOY but remain stable year-to-date

$3 $3

$6 $6 $7$5

-$3 -$1

$5 $5 $4 $3$5 $4

$7 $6

$9

$6


Year-over-year change in payments


32 © Experian

Terms reach record highs for overall & franchise used loans

59.19 62.64 66.01 67.05 63.36 65.3065.20 67.28 68.69 68.39 64.05 67.6055.74 58.39 61.92 64.48 62.30 61.50


Average loan term by tierAll Used Franchise used Independent used

-1.26

-0.24

0.22

0.710.92

0.48

-0.86

-0.19

0.20

0.760.94

0.50

-1.58

-0.45

0.04

0.48

0.96

0.11


Year-over-year change in used loan term


33 © Experian

9.3%

22.6%

43.5%

18.7%

9.1%

21.2%

43.4%

20.6%

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

Percentage of used loans by term

Q2 2019 Q2 2020

73+ month terms grow along with average credit scores for longer terms


659

688

660674

658

690

665679

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

Average used score by loan term

Q2 2019 Q2 2020

34 © Experian

Used loan rates show steady decreases for all but higher risk segments

20.67%17.78%

11.41%

6.05%4.08%

9.69%

19.78%

16.44%

10.56%

5.80%4.02%

8.47%

21.31%19.25%

13.30%

6.89%4.23%

12.55%


Average loan rates by tierAll Used Franchise used Independent used

5842

3

-49-69

-38

4923

-9

-54-72

-50

55 4923

-33

-65

1


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


35 © Experian

COVID impacts

Drill-down into year-to-date automotive

financing

36 © Experian

4.1% 9.7%

-5.8%

-54.0%-32.4%

0.2%

-3.6%

4.7%

-1.0%

-50.8%-33.3%

-10.6%

Jan 2020 Feb 2020 Mar 2020 Apr 2020 May 2020 June 2020

YOY volume1 change

Used New

How has COVID impacted consumer purchase volume?


1= loan, lease or cash

63.9% 68.6% 70.4% 67.3% 68.5% 69.2%

36.1% 31.4% 29.6% 32.7% 31.5% 30.8%


Market1 composition

37 © Experian

55.4% 54.5% 55.7% 63.8% 66.1% 65.2%

28.7% 29.8% 30.0% 24.0% 23.3% 23.8%15.8% 15.8% 14.3% 12.2% 10.6% 11.0%


Transaction type Cash Lease Loan

COVID and the impact on how consumers are financing


-2.1% -0.2%

0.6%13.7% 18.9% 15.3%

1.0%

-4.0% -2.6%-19.9% -22.4% -18.8%

6.0% 9.1% 3.4%

-12.3%-26.3% -22.2%


YOY change in transaction type

38 © Experian

34.1% 35.3% 35.0%27.4% 26.1% 26.8%


New lease % of new financing (loan/lease)

COVID and the impact on how consumers are financing


2.09%

-2.47% -2.03%-21.50% -25.68% -21.69%


YOY change in new leasing

39 © Experian

New market share(loan and lease units combined)


28.30% 27.60% 28.00%29.60% 29.50% 29.10% 29.20% 29.10% 28.50% 29.80% 30.40% 30.20%

26.70%

23.30% 22.8%

54.60% 55.20% 55.10%53.30% 53.30% 54.10% 53.40% 53.30%

54.90%53.40% 52.20% 52.70%

55.70%

62.10%63.5%

11.80% 11.90% 11.80% 12.10% 12.10% 11.70% 12.00% 12.00% 11.60% 11.70% 12.10% 11.60% 11.40%10.00% 9.8%

5.20% 5.20% 4.90% 4.80% 5.00% 4.90% 5.20% 5.40% 4.90% 5.00% 5.20% 5.30% 6.00%4.50% 3.82%

Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

Bank Captive Credit Union Finance Co

40 © Experian

721

715

712 712

714715

721

717

715

710

718

722

Jan Feb Mar Apr May Jun

New auto loans

2019

2020

Monthly average credit score and distribution shifts on new vehicle loans


9.6% 10.2% 10.8% 10.4% 8.2% 7.4%

15.4% 16.3% 17.2% 18.5% 16.6% 15.7%

75.0% 73.5% 72.0% 71.1% 75.2% 76.9%

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

Risk distribution for new loans

Prime

Nonprime

Subprime

3.4%

-2.5% -4.7%-9.8%

-25.3%-30.3%

-1.0% -4.2%-0.5%

7.0%

-2.9%-6.5%

-0.2%

1.3% 0.9%

-0.1%

4.6% 5.9%


YOY change in risk distribution for new loans

Subprime

Nonprime

Prime

41 © Experian

663 661

649650

658

661

665664

653652

654

661

Jan Feb Mar Apr May June

Used auto loans

2019

2020

Monthly average credit score and distribution shifts on used vehicle loans


26.6% 26.7% 31.8% 31.7% 30.7% 27.3%

21.0% 21.1%21.1% 22.0% 21.7% 21.8%

52.5% 52.2% 47.1% 46.4% 47.6% 50.9%


Risk distribution for used loans

Prime

Nonprime

Subprime

-1.9% -2.8%

-4.2%

-2.1%

6.1%

-0.6%

-2.1% -2.8%

-1.3%

0.8%

-0.9%

0.2%1.9%

2.7%3.6%

1.1%

-3.2%

0.2%


YOY change in risk distribution for used loans

Subprime

Nonprime

Prime

42 © Experian

$33,772 $33,588 $33,788$36,556 $36,323 $35,637

$20,972 $20,803 $20,302 $20,781 $20,843 $20,969


Average loan amount

Changes in loan characteristics


$570 $567 $565 $579 $565 $562

$398 $396 $394 $400 $397 $394


Average monthly payment

68.80 69.18 69.63

72.32 71.9470.81

65.00 64.88 64.5965.29 65.20 65.37


Average loan term

5.44% 5.60% 5.75% 5.58%5.01% 4.93%

9.17% 9.36%10.37% 10.28% 9.82%

9.25%


Average loan rate

New

Used

43 © Experian

Q2 Summary

• Captive market share rebounds as more prime consumers shift back into new vehicles

• Leasing remains low year-to-date

• Credit scores rise while subprime reaches some record lows

• Shifts to full-size pick-ups drive increased loan amounts resulting in higher payments while loan terms extend

• COVID results in reduction in subprime distributions and increased new financing among many borrowers

43 © Experian Experian Public. State of the Automotive Finance Market Q2 2020

Documents

AUTOMOTIVE INDUSTRY INSIGHTS Finance Market Report · 2020. 8. 31. · Throughout her career with Experian, Zabritski has overseen the product strategy for Experian Automotive’slending