Market Insight Snapshot - Experian

[Pages:5]Market Insight Snapshot

Automotive Loan Delinquencies Drop for First Time Since 2007

June 15, 2010

American consumers are doing a better job of making payments on their auto loans, as delinquencies on 30- and 60-day loans fell in Q1 2010 for the first time since Experian Automotive started reporting on quarterly loan delinquencies in 2007.

The 30-day delinquency rate fell 1.06 percent from Q1 2009 to Q1 2010 (2.82 percent to 2.79 percent), according to Experian Automotive's most recent analysis of the automotive finance market as of the first quarter of 2010. The 60-day delinquency rate fell from 0.79 percent in Q1 2009 to 0.78 percent in Q1 2010.

30-day delinquency

6% 5%

-3.69%

5.42%

5.38%

5.22%

4% 3%

-0.33% -1.92% 3.02%

2.99% 3.01%

2.60% 2.55%

1.96%

2%

1%

-0.66%

1.52% 1.51% 1.28%

-1.06% 2.82% 2.79% 2.62%

0%

Banks

Captive auto

Credit union

Q1 2008 Q1 2009

Finance/ other

Q1 2010

Total

60-day delinquency

2.0% 1.8% 1.6%

-7.61% 1.84%

1.62%

1.70%

1.4%

1.2%

1.0% 0.8% 0.6% 0.4%

-1.60% 0.77% 0.75%

8.06%

0.58%

0.57%0.62% 0.67%

-6.67%

0.45% 0.42% 0.33%

-1.27% 0.79% 0.78% 0.68%

0.2%

0.0%

Banks

Captive auto

Credit union

Finance/ other

Total

Q1 2008 Q1 2009 Q1 2010

Risk distribution: Total prime market accounts for 61.9 percent of all open loans

Risk distribution of open auto loans

100%

4%

90%

14.9%

15.7%

14.5%

80%

9.0%

8.9%

8.6%

2%

70%

15.0%

15.1%

15.0%

0%

60%

-2%

50%

23.4%

23.6%

24.1%

40%

-4%

30%

-6%

20%

37.6%

36.8%

37.8%

10%

-8%

0% Q1 2008

Q1 2009

Q1 2010

-10%

Super prime Prime Near prime Subprime Deep subprime

Change in risk distribution from Q1 2009

2.69%

2.34%

Near prime

Sub- Deep prime subprime

Super prime

Prime

-0.72% -2.71%

-7.62%

In Q1 2010, 61.9 percent of all open loans were to customers with Prime or Super prime credit. This is up 2.5 percent from Q1 2009, when 60.4 percent of all open loans were in the Prime or Super prime categories.

As a result of more conservative lending policies, the share of loans in all three Subprime categories -- Near prime, Subprime and Deep subprime -- fell in Q1 2010 compared to Q1 2009. Near prime dropped from 15.1 percent to 15 percent, Subprime fell from 8.9 percent to 8.6 percent, and Deep subprime fell from 15.7 percent to 14.5 percent.

Cautious lending drives up average credit scores for new and used vehicle loans

800 780 760 740 720 700 680 660 640 620 600

Average credit scores

3

773

774

775

775

776

762

766

753

755

677

684

680

4

668

670

668

661

665

653

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 New average score Used average score

Lending institutions are still taking a cautious approach to their lending strategies. The average credit score for a new vehicle loan in Q1 2010 was 776, up three points from Q1 2009. The average credit score for used vehicle loans rose to 665 in Q1 2010 from 661 in Q1 2009.

New vehicle credit did not loosen year over year

14.9%

100% 90 80 70

1.67% 6.15% 10.18%

13.48%

60

50

40 68.52% 30

20

10

0 Q1 2009

Super prime

New vehicle nancing

1.56% 5.87% 10.13%

13.54%

1.46% 5.66% 9.79%

13.21%

1.44% 5.60% 9.75%

13.35%

1.38% 5.68% 9.81%

13.25%

-6.3%

68.89% 68.88% 69.85% 69.89%

1.4%

Q2 2009 Q3 2009 Q4 2009 Q1 2010 Prime Near prime Subprime Deep subprime

When comparing year-over-year credit market data, we see there has been no loosening of the credit market. For new vehicle financing, the combined three tiers of Subprime finance (Near prime, Subprime and Deep subprime) have tightened. In Q1 2009, 17.99 percent of loans went to customers in these credit tiers, compared to 16.86 percent in Q1 2010.

Change from Q1 2009

5%

Deep Sub- Near

2.0%

subprime prime prime Prime

0%

Super prime

-1.8%

-5%

-3.6%

-10%

-7.6%

-15%

-20%

-17.6%

When comparing rolling quarters, we see there has been a slight uptick in the percent of loans going to Near prime, Subprime and Deep subprime customers -- 16.79 percent in Q4 2009 vs. 16.86 percent in Q1 2010). However, auto loans tend to be highly cyclical, and an uptick in Subprime loan share from Q4 of one year to Q1 of the next is a normal occurrence. Therefore, we do not see this recent movement as a true indicator that the credit markets are loosening.

Credit tightened year over year for deep subprime used vehicle customers

Used vehicle nancing

14.9%

3%

100%

90% 25.40% 20.41% 18.64% 19.40% 24.19%

2%

80%

70% 15.29% 60% 50% 13.08%

40% 12.01% 30%

20% 34.22% 10%

0 Q1 2009

Super prime

14.86%% 14.20% 13.84% 13.92% 12.99% 13.35%

14.66% 13.86% 13.27%

15.29% 13.19% 12.21%

37.89% 39.89% 38.82% 35.12%

-2.04% 2.37%

Q2 2009 Q3 2009 Q4 2009 Q1 2010 Prime Near prime Subprime Deep subprime

1% 0% -1% -2% -3% -4% -5% -6%

Change from Q1 2009

2.6%

Deep Subsubprime prime

0.0%

0.9%

Near prime

1.7% Prime Super prime

-4.8%

Even in the used vehicle market (a traditional stronghold for Subprime financing), loans were more challenging to come by for Subprime and Deep subprime customers during Q1 2010 compared to Q1 2009. Subprime financing's share of the market fell flat during the quarter, while market share for Deep subprime financing fell 4.8 percent.

Near prime, Prime and Super prime were all up quarter over quarter, at 0.9 percent, 1.7 percent and 2.6 percent, respectively.

Methodology Experian Automotive's quarterly credit trend analysis features market reporting data and analysis from Experian Automotive's AutoCount? Risk Report, which analyzes automotive lending markets based on a uniform measurement of credit quality that segments markets by geography, credit score and vehicle registrations, among other factors. For more information on Experian Automotive's AutoCount Risk Report, visit . It also incorporates data from the Experian?Oliver Wyman Market Intelligence Reports, which provide topical, quarterly analysis; peer benchmarking options; and commentary on key issues facing the financial services industry. To subscribe to the Experian?Oliver Wyman Market Intelligence Reports, go to .

The data used for this analysis was compiled from Experian credit data and vehicle title and registration data from Experian Automotive. A 10 percent representative sample was randomly selected and analyzed for automotive loan performance. Vehicle financing is compiled from state title data and is based on those states where the lender is identified (46 states).

Experian Automotive analysis and studies For additional Experian Automotive information, including data analysis, research and related information, visit .

For more information or to speak with a subject matter expert, please contact: Christopher Fielder Experian Public Relations 1 224 698 8628 christopher.fielder@

? 2010 Experian Information Solutions, Inc. All rights reserved.

Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc.

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