Automotive Lending

Experian recently released its Q1 2020 Market Trends report, which provides insights about the vehicles on the road and the most popular vehicle segments. 

Origination data from April and May provide some insight into the more immediate effects of the pandemic on the automotive industry.

In Q1 2020, 30-day delinquencies decreased from 1.98 percent in Q1 2019 to 1.93 percent, while 60-day delinquencies dropped from 0.68 percent to 0.67.

This week, Experian released a new version of our CrossCore® digital identity and fraud risk platform, adding new tools and functionality to help businesses quickly respond to today’s emerging fraud threats. The ability to confidently recognize your customers and safeguard their digital transactions is becoming an increasing challenge for businesses. Fraud threats are already rising across the globe as fraudsters take advantage of the global health crisis and rapidly shifting economic conditions. CrossCore combines risk-based authentication, identity proofing and fraud detection into a single cloud platform, which means businesses can more quickly respond to an ever-changing environment. And with flexible decisioning orchestration and advanced analytics, businesses can make real-time risk decisions throughout the customer lifecycle. “Now more than ever, businesses need to lean on capabilities and technology that will allow them to rapidly respond in these challenging times, increase identity confidence in every transaction, and provide a safe and convenient experience for customers,” said E.K. Koh, Experian’s Senior Vice President of Global Identity & Fraud Solutions in a recent press release. “This new CrossCore release enables businesses to easily leverage best-in-class, pre-integrated identity and fraud services through simple self-service.” This new version of CrossCore features a cloud architecture, modern user interface, progressive risk assessments, faster response times, self-service workflow configuration, and a transactional volume reporting dashboard. These enhancements give you a simpler way to manage how backing applications are utilized, allow you to analyze key performance indicators in near real-time, and empower you to catch more fraud faster - without impacting the customer experience. “Recent Aite Group research shows that many banks have seen digital channel usage increase 250% in the wake of the pandemic, so ensuring a seamless and safe customer experience is more important than ever,” said Julie Conroy, Research Director at Aite Group. “Platforms such as CrossCore that can enable businesses to nimbly respond to changing patterns of customer behavior as well as rapidly evolving attack tactics are more important than ever, as financial services firms work to balance fraud mitigation with the customer experience.” CrossCore is the first identity and fraud platform that enables you to connect, access, and orchestrate decisions across multiple solutions. With the newest version, Experian enhances your ability to consolidate numerous fraud risk signals into a single, holistic assessment to improve operational processes, stay ahead of fraudsters, and protect your customers. Read Press Release Learn More About CrossCore

The coronavirus (COVID-19) outbreak is causing widespread concern and economic hardship for consumers and businesses across the globe – including financial institutions, who have had to refine their lending and downturn response strategies while keeping up with compliance regulations and market changes. As part of our recently launched Q&A perspective series, Shannon Lois, Experian’s Head of DA Analytics and Consulting and Bryan Collins, Senior Product Manager, tackled some of the tough questions for lenders. Here’s what they had to say: Q: What trends and triggers should lenders be prepared to react to? BC: Lenders are still trying to figure out how to assess risk between the broader, longer-term impacts of the pandemic and the near-term Coronavirus Aid, Relief, and Economic Security (CARES) Act that extends relief funds and deferment to consumers and small businesses. Traditional lending processes are not possible, lenders will have to adjust underwriting strategies and workflows as they deploy hardship programs while complying with the Act. From a utilization perspective, lenders need to look for near-term trends on payments, balances and skipped payments. From an extension standpoint, they should review limits extended or reduced by other lenders. Critical trends to look for would be missed or late auto payments, non-traditional credit shopping and rental payment delinquencies. Q: What should lenders be doing to plan for an uptick in delinquencies? SL: First, lenders should make sure they have a complete picture of how credit risk and losses are evolving, as well as any changes to their consumers’ affordability status. This will allow a pointed refinement of their customer management strategies (I.e. payment holidays, changing customer to cheaper product, offering additional services, re-pricing, term amendment and forbearance management.) Second, given the increased stress on collection processes and regulations guidelines, they should ensure proper and prepared staffing to handle increased call volumes and that agency outsourcing and automation is enabled. Additionally, lenders should migrate to self-service and interactive communication channels whenever possible while adopting new segmentation schemas/scores/attributes based on fresh data triggers to queue lower risk accounts entering collections. Q: How can lenders best help their customers? SL: Lenders should understand customers’ profiles with vulnerability and affordability metrics allowing changes in both treatment and payment. Payment Holidays are common in credit card management, consider offering payment freezes on different types of credit like mortgage and secured loans, as well as short term workout programs with lower interest rates and fee suppression. Additionally, lenders should offer self-service and FAQ portals with information about programs that can help customers in times of need. BC: Lenders can help by complying with aspects of the CARES Act guidance; they must understand how to deploy payment relief and hardship programs effectively and efficiently. Data integrity and accuracy of loan reporting will be critical. Financial institutions should adjust their collection and risk strategies and processes. Additionally, lenders must determine a way to address the unbanked population with relief checks. We understand how challenging it is to navigate the changing economic tides and will continue to offer support to both businesses and consumers alike. Our advanced data and analytics can help you refine your lending processes and better understand regulatory changes. Learn more About Our Experts: Shannon Lois, Head of DA Analytics and Consulting, Experian Data Analytics, North America Shannon and her team of analysts, scientists, credit, fraud and marketing risk management experts provide results-driven consulting services and state-of-the-art advanced analytics, science and data products to clients in a wide range of businesses, including banking, auto, credit, utility, marketing and finance. Shannon has been a presenter at many credit scoring and risk management conferences and is currently leading the Experian Decision Analytics advisory board. Bryan Collins, Senior Product Manager, Experian Consumer Information Services, North America Bryan is a member of Experian's CIS product management team, focusing on the Acquisitions suite and our evolving Ascend Identity Services Platform. With more than 20 years of experience in the financial services and credit industries, Bryan has established strong partnerships and a thorough understanding of client needs. He was instrumental in the launch of CIS's segmentation suite and led product management for lender and credit-related initiatives in Auto. Prior to joining Experian, Bryan held marketing and consumer experience roles in consumer finance, business lending and card services.

If there is one word to describe the automotive finance market in Q4 2019, it’s stable. By nearly every measure, the automotive finance market continued to move along at a good pace.

In the past 10 years, consumers begin purchasing convertibles as early as March.

Update: After closely monitoring updates from the WHO, CDC, and other relevant sources related to COVID-19, we have decided to cancel our 2020 Vision Conference. If you had the chance to experience tomorrow, today, would you take it? What if it meant you could get a glimpse into the future technology and trends that would take your organization to the next level? If you’re looking for a competitive edge – this is it. For more than 38 years, Experian’s premier conference has connected business leaders to data-driven ideas and solutions, fueling them to target new markets, grow existing customer bases, improve response rates, reduce fraud and increase profits. What’s in it for you? Everything to gain and nothing to lose. Are you a marketer? These sessions were made to drive your conversion rates to new heights: Know your customers via omnichannel marketing: Your customers are everywhere, but can you reach them? Learn how to drive business-expansion strategy, brand affinity and customer engagement across multiple channels. Plus, gain insight into connecting with customers via one-to-one messaging. By invitation only, the future of ITA marketing: An evolving landscape means marketers face new challenges in effectively targeting consumers while staying compliant. In this session, we’ll explore how you can leverage fair lending-friendly marketing data for targeting, analysis and measurement. Want the latest in technology trends? Dive into discussions to transform your customer experience: Credit in the age of technology transformation: Machine learning and artificial intelligence are the current darlings of big data, but the platform that drives the success of any big data endeavor is crucial. This session will dive into what happens behind the curtain. Put away your plastic – next-generation identity: An industry panel of experts discusses the newest digital identity and authentication capabilities – those in use today and also exciting solutions on the horizon. How about for the self-proclaimed data geeks? Analyze these: Alternative data: Listen in on an in-depth conversation about creative and impactful examples of using emerging data assets, such as alternative and consumer-permissioned data, for improved consumer inclusion, risk assessment and verification services. The next wave in open data: Experian will share their views on the potential of advanced data and models and how they benefit the global value chain – from consumer scores to business opportunities – regardless of local regulations. And the risk masters? Join us as we kick fraud to the curb: Understanding and tackling synthetic ID fraud: Synthetic IDs present a serious challenge for our entire industry. This expert panel will explore the current landscape – what’s working and what’s not, the expected impact of the next generation SSA eCBSV service, and best practice prevention methods. You are your ID – the new reality of biometrics: Consumers are becoming increasingly comfortable with biometrics. Just as CLEAR has transformed how we use our biometric identity to move through airports, sports venues and more, financial transactions can also be made friction-free. The point is, there’s something for everyone at Vision 2020. It’s not just another conference. Trade in stuffy tradeshow halls and another tri-fold brochure for the insights and connections you need to take your career and organization to the next level. Like technology itself, Vision 2020 promises to connect us, unify us and enable us all to create a better tomorrow. Join us for unique networking opportunities, one-on-one conversations with subject-matter experts and more than 50 breakout sessions with the industry’s most sought-after thought leaders.    

According to Experian’s Q3 2019 State of the Automotive Finance Market report, used vehicle financing increased across all credit tiers.

The average new vehicle loan hit $32,119 in Q2 2019. Average used vehicle loan amounts reached $20,156 in Q2 2019.

Introducing the newly designed AutoCheck Score™ Quickly compare and select used vehicles As an auto industry professional, you use vehicle history reports every day. But they’re long, complex — easily misinterpreted. You always aim to conduct a thorough inspection. But what if you’re at a busy auction house or browsing online, where there’s simply not enough time or context? The tool you use every day to make critical decisions about used vehicles should be accurate and easy to understand — built for streamlined evaluation. So we made one. New look, same impact We’ve revamped the AutoCheck score with a modern look and feel that’s easier than ever to read. And it’s still invaluable for quickly comparing and selecting used vehicles. What, exactly, is it? Experian® analyzes the detailed records in an AutoCheck® vehicle history report to generate the AutoCheck Score. Like a credit score or gas mileage rating for new vehicles, it’s a single number on a standardized scale. The new gauge shows the score range (from 1 - 100) for vehicles of similar age in the same class. If a car is above average in its range, you can feel confident that it’s a solid investment. The score makes it much simpler to assess how a used vehicle measures up, estimating its: Overall roadworthiness Reliability compared to other vehicles in its class Likelihood of being on the road in five years It is invaluable for making informed decisions, managing inventory, mitigating risk and instilling confidence in customers. Bigger, better You can depend on the AutoCheck Score to deliver a high-quality, more accurate assessment. That’s because it’s derived from Experian’s world-class, continually updated database, which leverages reliable information from extensive sources, including: Tens of thousands of distinct accident sources, many exclusive to Experian 95% of U.S. auction houses — most providing structural damage, salvage-and-junk and export-data announcements exclusively to Experian Important OEM safety and open recall data State departments of motor vehicles and departments of public safety, insurance companies and other independent sources Police department/state agency accident information from all 50 states and Washington D.C. Federal sources, like import records That’s a lot of data. And some complex statistical modeling. Don’t worry; we’ll take care of the heavy lifting. All you have to do is keep score. Why you need it Whether you’re a dealer, lender, manufacturer certified pre-owned program or consumer portal, the score will transform the way you do business to boost your bottom line. Dealers: Use the score to mitigate risk, manage and market your inventory, close sales faster and build customer loyalty. Lenders/Credit Unions: Use the score to more accurately estimate a vehicle’s value at every stage of the loan life cycle, from origination to portfolio review, account management and asset collection. Manufacturer Certified Pre-Owned Programs: Use the AutoCheck report for vehicle certification. Consumer Portals: Increase customer satisfaction — and traffic — by allowing OEMs and dealers to post the score with their listings and make online car shopping a breeze. Count on the AutoCheck Score To learn more about the score — or how to wield its power to maximal effect — find its secrets in this treasure trove of a white paper or call 1 888 675 5596.  What are you waiting for? Redesign your business with the redesigned score.

Experian Boost provides a unique opportunity to help dealers build loyalty while helping consumers.

Pickups are the most common vehicle in operation at 20% share today and hold 16.5% of new vehicle registrations in the market in Q1 2019.

Vehicle affordability has been a main topic of conversation in the auto industry for some time, and based on the data, it’s not going unnoticed by consumers. The average new vehicle loan in Q1 2019 reached $32,187, while the average new vehicle monthly loan payment hit $554. How are car shoppers reacting? Perhaps the biggest shift in Q1 2019 was the growth of prime and super prime customers opting for used vehicles. The percentage of prime (61.88 percent) and super-prime (44.78 percent) consumers choosing used vehicles reached an all-time high in Q1 2019, according to Experian data. Not only are we seeing new payment amounts increase, but used loan amounts and payments are on the rise as well, though the delta between the two can be one of the reason we’re seeing more prime and super prime opt for used. The average used vehicle loan was slightly above $20,000 in Q1 2019, while the average used vehicle payment was $391. We know that consumers often shop based on the monthly payment amount, and given the $163 difference between average monthly payments for new and used, it’s not surprising to see more people opt for used vehicles. Another way that consumers can look to have a smaller payment amount is through leasing. We’re continuing to see that the top vehicles leased are more expensive CUVs, trucks and SUVs, which are pricier vehicles to purchase. But with the average lease payment being $457 per month, there’s an average difference of $97 compared to loan payments. In Q1 2019, leasing was down slightly year-over-year, but still accounted for 29.07 percent of all vehicle financing. On the other side of the affordability equation, beyond cost of vehicles, is concern around delinquencies: will consumers be able to make their payments in a timely manner? So far, so good. In Q1 2019, 30-day delinquencies saw an increase to 1.98 percent, up from 1.9 percent a year ago. That said, banks, credit unions and finance companies all saw slight decreases in 30-day delinquency rates, and 60-day delinquencies remained relatively stable at 0.68 percent year-over-year. It’s important to keep in mind that the 30-day delinquency rate is still well-below the high-water mark in Q1 2009 (2.81 percent). The vehicle finance market appears to remain strong overall, despite rising vehicle costs, loan amounts and monthly payments. Expect consumers to continue to find ways to minimize monthly payments. This could continue the shift into used vehicles. Overall, as long as delinquencies stay flat and vehicle sales don’t taper too badly, the auto finance market should stay on a positive course. To watch the full Q1 2019 State of the Automotive Finance Market webinar, click here.

Consumer credit trends are continuously changing, making it imperative to keep up with the latest developments in originations, delinquencies on mortgages, credit cards and auto loans. By monitoring consumer behavior and market trends over time, you can predict and prepare for potential issues within each market. In this 30-minute webinar, our featured speakers, Gavin Harding, Experian Senior Business Consultant, and Alan Ikemura, Experian Data Analytics Senior Product Manager, reveal Q1 2019 market intelligence data and explore recent advances in consumer credit trends. Watch our on-demand webinar