state of the automotive finance marketq4 2015 q4 2016 percentage of vehicles with financing new used...
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Experian Public.
www.experian.com/automotive
State of the Automotive Finance Market
A look at loans and leases in Q4 2016
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
3 © Experian
Overall Automotive Finance Market
A review of all open automotive loans & leases
4 © Experian
$886
$987
$1,072
$0
$200
$400
$600
$800
$1,000
$1,200
2014 Q4 2015 Q4 2016 Q4
Total open automotive loan balance
Loan balances break record highs while Credit Unions experience largest YOY growth (loans regardless of origination period)
Source: Experian-Oliver Wyman Market Intelligence Reports
$313 $337 $364
$230 $244 $252
$208$241
$277$135
$166$179
$0
$200
$400
$600
$800
$1,000
$1,200
2014 Q4 2015 Q4 2016 Q4
Total open automotive loan balance
All Banks Captive Auto Credit Union Finance
Source: Experian-Oliver Wyman Market Intelligence Reports
Bill
ion
s
5 © Experian
3.45% 3.66% 3.91%
15.58% 15.77% 15.96%
18.06% 18.03% 17.90%
27.75% 27.23% 26.93%
35.16% 35.30% 35.30%
2014 Q4 2015 Q4 2016 Q4
Loan balance risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Majority of loan balances remain prime or higher with modest growth in high risk segments
14.57%
8.62%
6.57% 6.15%
7.34%
Deepsubprime
Subprime Nonprime Prime Super prime
Year-over-year balance change
Source: Experian-Oliver Wyman Market Intelligence Reports
6 © Experian
30 day delinquency is flat with slight increase in at-risk dollars (loans and leases regardless of origination period)
Source: Experian-Oliver Wyman Market Intelligence Reports
Source: Experian-Oliver Wyman Market Intelligence Reports
7 © Experian
30-day delinquency balances by state(loans regardless of origination period)
Source: Experian-Oliver Wyman Market Intelligence Reports
HI = 1.99%
1.42%
Source: Experian-Oliver Wyman Market Intelligence Reports
8 © Experian
60 day delinquency growth across all lender types(loans and leases regardless of origination period)
Source: Experian-Oliver Wyman Market Intelligence Reports
Source: Experian-Oliver Wyman Market Intelligence Reports
9 © Experian
60-day delinquency balances by state(loans and leases regardless of origination period)
Source: Experian-Oliver Wyman Market Intelligence Reports
HI = 0.54%
0.43%
Source: Experian-Oliver Wyman Market Intelligence Reports
10 © Experian
Originations in Q4 2016
Trends in automotive loan and lease originations
11 © Experian
85.9% 85.2%
54.7% 53.5%
Q4 2015 Q4 2016
Percentage of vehicles with financing
New Used
Automotive financing: snapshot of how and what consumers are financing
28.87% 28.94%
Q4 2015 Q4 2016
% of all new vehicles that are leased
46.86% 46.38%
53.14% 53.62%
Q4 2015 Q4 2016
Finance Market: new v used units
New Used
3.76% 3.97%
Q4 2015 Q4 2016
Used % of lease market
Source: Experian Automotive
12 © Experian
35
.6%
6.3
%
27
.8%
18
.0%
12
.3%
32
.9%
6.0
%
28
.4%
19
.1%
13
.5%
Bank BHPH Captive CreditUnion
Finance Co
Market Share of Total Financing(new/used units & loan/lease)
Q4 2015 Q4 2016
Credit Unions and Captives pick up market share across the board (loan and lease units combined)
34
.6%
0.2
%
50
.0%
10
.2%
5.1
%
30
.6%
0.1
%
52
.0%
11.9
%
5.4
%
Bank BHPH Captive Credit Union Finance Co
Market Share of New Financing
Q4 2015 Q4 2016
36
.6%
11.9
%
7.6
% 25
.0%
18
.9%
35
.0%
11.1
%
8.0
% 25
.4%
20
.5%
Bank BHPH Captive Credit Union Finance Co
Market Share of Used Financing
Q4 2015 Q4 2016
Source: Experian Automotive
13 © Experian
726
716714
712714
734
719717
715
720723
715
712711 711
Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016
Average new credit scores
All New New Lease New Loan
Credit scores increase across all transaction types
650 646 648 649654
675 673 672 673 677
603 600 603 607614
Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016
Average used credit scores
All Used Franchise Used Independent Used
Source: Experian Automotive
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.
Source: Experian Automotive
15 © Experian
3.35% 3.20%
18.70% 17.62%
20.09% 19.77%
39.20% 40.01%
18.66% 19.40%
Q4 2015 Q4 2016
Total (new & used units) risk distribution
Total finance market (loan & lease) becomes increasingly more prime across all, new and used financing
9.76% 9.43%17.69% 17.12%
44.64% 44.74%
27.20% 27.98%
Q4 2015 Q4 2016
New risk distribution
5.69% 5.36%26.61% 24.79%
22.21% 22.09%
34.39% 35.86%
11.10% 11.90%
Q4 2015 Q4 2016
Used risk distribution
Deep Subprime Subprime Nonprime Prime Super PrimeSource: Experian Automotive
16 © Experian
7.78% 6.93%
17.68% 16.32%
47.82% 48.12%
26.18% 28.15%
Q4 2015 Q4 2016
New lease risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Leasing remains very prime as more consumers across all risk tiers choose to lease (loans not included)
25.2%
31.7%
32.7%
24.2%
31.6%
34.8%
Deep &Sub
Nonprime
Prime +
% of new borrowers choosing to lease
Q4 2016
Q4 2015
Source: Experian Automotive
17 © Experian
3.80% 3.66%
20.60% 19.56%
20.54% 20.43%
37.71% 38.54%
17.35% 17.81%
Q4 2015 Q4 2016
Total (new & used units) loan risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Despite more prime consumers shifting to leasing the loan market becomes more prime
10.70% 10.67%17.69% 17.52%
43.15% 43.06%
27.68% 27.89%
Q4 2015 Q4 2016
New loan risk distribution
5.63% 5.32%26.61% 24.81%
22.28% 22.15%
34.41% 35.87%
11.07% 11.85%
Q4 2015 Q4 2016
Used loan risk distribution
Source: Experian Automotive
18 © Experian
92
.21
%
80.3
7%
67
.46
%
56
.77
%
39
.70
%
91
.27
%
79
.75
%
68
.17
%
58
.52
%
41
.85
%Deep
SubprimeSubprime Nonprime Prime Super
Prime
Percentage of consumers by risk tier choosing used loans
Q4 2015 Q4 2016
Prime and Super Prime borrowers choose used vehicles at an increasing rate resulting in shifts among all dealer types
18.97% 17.56%
23.81% 23.38%
41.34% 42.44%
13.88% 14.70%
Q4 2015 Q4 2016
Used Franchise loan risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
11.37% 10.80%
39.49% 36.91%
20.77% 21.09%
22.85% 24.92%5.52% 6.28%
Q4 2015 Q4 2016
Used Independent loan risk distribution
Deep Subprime Subprime Nonprime Prime Super Prime
Source: Experian Automotive
19 © Experian
$29,5
51
$18,8
50
$20,6
41
$16,0
92
$30
,62
1
$19,3
29
$21,2
25
$16,7
65
Avg new loanamount
Avg used loanamount
Avg Franchiseused loanamount
Avg Independentused loanamount
Average loan amount
Q4 2015 Q4 2016
Average loan amounts reach record highs
$2
5,1
00
$2
8,0
82
$3
1,4
22
$3
1,5
02
$2
7,6
96
$1
4,6
33
$1
6,4
30
$1
9,1
03
$2
0,7
48
$2
0,2
21
$1
6,6
31
$1
8,5
45
$2
0,9
58
$2
2,0
52
$2
1,1
90
$1
3,6
79
$1
4,6
35
$1
6,6
04
$1
8,5
79
$1
8,5
34
DeepSubprime
Subprime Nonprime Prime Super Prime
Average loan amount by tier
Avg New All Used Franchise used Independent used
Source: Experian Automotive
20 © Experian
67
36
68
36
New loan New lease
Average new term
Q4 2015 Q4 2016
New loan term at 68 months with higher terms on the higher risk new loans
72.0
7
72.4
7
72.5
3
69.5
9
62.7
0
37.6
0
37.4
4
37.1
6
36.5
8
35.7
6
DeepSubprime
Subprime Nonprime Prime Super Prime
Avg new term by risk tier
New loan New lease
Source: Experian Automotive
21 © Experian
66
58
63
66
59
63
Franchise used Independent used All used
Average used term
Q4 2015 Q4 2016
Used terms rise as more prime consumers, who have longer terms, choose used vehicles
66
.08
67
.34
67
.96
67
.00
62
.54
54
.29
56
.89
60
.61
62
.89
60
.45
58
.33
61
.78
64
.91
65
.42
61
.66
DeepSubprime
Subprime Nonprime Prime Super Prime
Average term by risk tier
Franchise used Independent used All used
Source: Experian Automotive
22 © Experian
770754
699681
775756
700682
37 - 48 49 - 60 61 - 72 73 - 84
Average new score by loan term
Q4 2015 Q4 2016
Average scores by term riselease is not included
647
681658 667
656
686
661 669
37 - 48 49 - 60 61 - 72 73 - 84
Average used score by loan term
Q4 2015 Q4 2016
Source: Experian Automotive
23 © Experian
20.8%
42.0%
29.0%
18.7%
40.3%
32.1%
49 - 60 61 - 72 73 - 84
Percentage of new loans by term
Q4 2015 Q4 2016
Longer term loans continue to dominate the market
23.6%
41.1%
16.4%
23.6%
41.1%
18.2%
49 - 60 61 - 72 73 - 84
Percentage of used loans by term
Q4 2015 Q4 2016
Source: Experian Automotive
24 © Experian
$493
$412
$506
$414
New loan New lease
Average new payment
Q4 2015 Q4 2016
New payments reach record highs while leasing offers lower payments
$504
$521
$525
$511
$484
$435
$431
$419
$413
$411
DeepSubprime
Subprime Nonprime Prime Super Prime
Avg new payment by risk tier
New loan New lease
Source: Experian Automotive
25 © Experian
$374
$347
$359
$380
$353
$364
Franchise used Independent used All used
Average used payment
Q4 2015 Q4 2016
Average used payments also climb
$3
87
$3
92
$3
83
$375
$3
74
$3
85
$3
75
$3
48
$3
36
$3
37$3
80
$3
78
$3
64
$3
57
$3
60
DeepSubprime
Subprime Nonprime Prime Super Prime
Average payment by risk tier
Franchise used Independent used All used
Source: Experian Automotive
26 © Experian
4.6
3%
8.7
8%
7.5
7%
11
.81
%
4.7
4%
8.5
0%
7.3
7%
11
.23
%Avg new rate Avg used rate Franchise
used rateIndependent
used rate
Average rates
Q4 2015 Q4 2016
Average new rate rises while prime shift to used and overall higher scores results in lower rates in the used market
13
.59
%
10
.71
%
6.4
2%
3.6
0% 2.6
3%
19
.03
%
15
.70
%
9.4
9%
5.0
9%
3.3
9%
17
.62
%
14
.19
%
8.7
8%
4.8
9%
3.3
5%
20
.16
%
17
.60
%
11.2
6%
5.7
8%
3.4
5%
DeepSubprime
Subprime Nonprime Prime Super Prime
Average rates by tier
Avg New All Used Franchise used Independent used
Source: Experian Automotive
27 © Experian
Portfolio balances reach record levels as loan amounts grow to all-time highs
Increases in both 30 & 60-day delinquency rates
Leasing drops below 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 while terms continue to extend
Summary