Download - The State of the Subprime Market September 2011 Jim Bass, CEO Auto One Acceptance Corporation Jack Tracey, Executive Director National Automotive Finance

The State of the Subprime MarketSeptember 2011

Jim Bass, CEO Auto One Acceptance Corporation

Jack Tracey, Executive Director National Automotive Finance Association

Jack Tracey

Executive Director

National Automotive Finance Association

State of the Below Prime Auto Financing Industry

• Funding availability issues diminishing -- even non-prime

• Innovation abounds

• Risk managers analyzing scorecard and FICO predictability

• Refinements in underwriting

• Collection effectiveness continues to deliver benefits

• Direct Internet financing challenging the indirect model

• Regulation -- Dodd-Frank requirements; CFPB formation

• Outsourcing/offshoring continues

• Dealer application portals expand capabilities

• Electronic processing picking up speed

Top Auto Financing Industry Trends and Events

Property of the National Automotive Finance Association

Year-over-Year Summary Metrics

YOY summary data for core respondent group (same 26 companies, 9 Small, 13 Medium, 4 Large)

Origination FICO

3 points

NEW

3 points

USED

Average Amount Financed

$916

NEW

USED

$754

30 Day $ Delinquency

57 bp

NEW

USED

56 bp

Unit Repo Rate

95 bp

NEW

USED

209 bp

Net $ Charge-off

Rate

49 bp

NEW

USED

352 bp

Average Term

NEW

USED

1 month

3 month


2010 significant issues: Consolidation and alliances continue High Mortgage Defaults More Regulatory and Compliance Issues Returning Sources of Funding Competitive Opportunities

Non-Prime Industry Trends -- 2011 Update

New challenges but some continue….

2011 significant issues: Predictability of Scoring Models Regulatory Uncertainty Housing Crisis Lingers On High Unemployment Continues Re-engineering for growth


2008 2009 20100%

20%

40%

60%

80%

100%

25% 26%35%

20%25%

32%

2008 – 2010 Booked Contract Distribution

61-72 mo% 49-60 mo

Trend of Used Extended Terms


Used terms continue to extend

2008 2009 2010

0%

20%

40%

60%

80%

100%

2% 4% 2%6% 4%

2%

16%22%

18%

35%

47%

49%

22%

19%24%

17%

3% 4%

2008 – 2010 Booking Risk Distribution

< 500 500-549 550-619 620-679 680-719 720+

Trend of Originations by Risk Band


0% 10% 20% 30% 40% 50% 60%

27%

56%

17%

22%

20%

38%

13%

17%

Year-to-Year Auto-Decision Trend(Percent Using)

2009 2010

SMALL

MEDIUM

LARGE

ALL

Auto Decision Update

Substantial increases in auto-decision usage in 2010


Used0%

20%

40%

60%

80%

100%

28%

35%

32%

Origination Distribution

<=36 37 - 48 49 - 60 61 - 72 73 - 84

Up again from 51%

USED Originations by TERM


Avg FICO

0

200

400

600

800

<=36 37 - 48 49 - 60 61 - 72 73 - 84 >84

Up substantially from 556



Avg LTV

0%

50%

100%

150%

<=36 37 - 48 49 - 60 61 - 72 73 - 84 > 84

Down substantially from 126%



Originations Increased credit availability spurs growth

Look-to-Book rates are up significantly especially for middle-tier applicants

Significant decrease in highest risks (<500) Significant increases in auto decisions Longer used contract maturities – mitigated by risk and LTV changes New-vehicle financing continues to expand (18% of booked vs 15% last

year) Verification procedures are intensifying Risk models are being refined to account for strategic defaulters

2010 NAF Survey Trends


Interest Income Cost of Funds Pre-Tax Income

-5%

0%

5%

10%

15%

20%

25%

30%

22.65%

4.40% 7.30%

20.38%

3.88% 5.55%

19.63%

3.76%8.75%

20.55%

3.93% 6.56%

Small

Medium

Large

All

Pre-tax Income Up 184% -- lower losses and cost of funds offset lower interest income.


Summary Profitability Metrics by Class Size

Small

Medium

Large

All

Repossession Account Rate

-5%

0%

5%

10%

15%

Overall average repo rates were down from prior year, particularly in the Small

group.

Repossession Avg Net Loss Per Account$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

Overall average net loss per repo was down $1,218 from

prior year.

Down from 14.2%


Repossession

Portfolio Results Pre-Tax Income is up 184%

Lower losses and funding costs more than offset rate decreases Delinquency improving Repossession and bankruptcy losses beginning to decrease More effective collection operations continuing to pay off

Behavioral scoring taking hold Early intervention

Vintage delinquency and loss analysis is the norm

2010 NAF Survey Trends


Download - The State of the Subprime Market September 2011 Jim Bass, CEO Auto One Acceptance Corporation Jack Tracey, Executive Director National Automotive Finance

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