Tag: auto lending
According to Experian’s State of Automotive Finance Market: Q3 2021 report, leasing comprised 24.03% of new vehicle financing in Q3 2021.
In Q3 2021, the average new vehicle loan amount increased 8.5% year-over-year, while the average used vehicle loan jumped more than 20% year-over year.
The early assessment for the automotive industry is that despite significant challenges at the onset of the pandemic, the industry continues to rebound.
Experian Boost provides a unique opportunity to help dealers build loyalty while helping consumers.
Vehicle affordability is a hot topic in the auto industry and it hasn't gone unnoticed by consumers as data shows vehicle pricing continues to increase.
Consumer credit trends and markets are constantly evolving, particularly when it comes to originations and delinquencies on mortgages, credit cards and auto loans. According to Experian research, over 2.7 million out of 89 million active automotive loans and leases are either 30 or 60 days delinquent. Triggers that signal a greater likelihood of consumers falling delinquent on loans, mortgages and credit card payments, include high-interest rates, a high utilization rate and recent derogatory trades. By tracking and forecasting consumer trends over time, you can more easily predict consumer behavior and better prepare for potential issues within each market. Join Gavin Harding, Experian Senior Business Consultant, and Alan Ikemura, Experian Data Analytics Senior Product Manager, during our live Quarterly Credit Trends webinar on May 30 at 2:00 p.m. ET. Our expert speakers will provide a view of the real estate market and share insights on the latest consumer credit trends. Highlights include: 2019 economic drivers Q1 2019 origination and delinquency trends Mortgage Home equity Bankcard Auto Register now
Experian Boost gives consumers greater control over their credit profiles by allowing them to add non-traditional credit information to their Experian credit file.
Auto originations continue to increase — particularly within prime categories. As auto loan originations continue their upward trend, lenders can stay ahead of the competition by using advanced analytics to target the right customers and increase profitability.
The economic expansion just passed the eight-year mark, and consumer credit defaults across mortgages, bankcards and auto loans are at pre–financial crisis levels
When discussing automotive lending, it seems like one term is on everyone’s lips: “subprime auto loan bubble.” But what is the data telling us?
For an industry that has grown accustomed to sustained year-over-year growth, recent trends are concerning. The automotive industry continued to make progress in the fourth quarter of 2016 as total automotive loan balances grew 8.6% over the previous year and exceeded $1 trillion. However, the positive trend is slowing and 2017 may be the first year since 2009 to see a market contraction. With interest rates on the rise and demand peaking, automotive lending will continue to become more competitive. Lenders can be successful in this environment, but must implement data-driven targeting strategies. Credit Unions Triumph Credit unions experienced the largest year-over-year growth in the fourth quarter of 2016, increasing 15% over the previous period. As lending faces increasing headwinds amid rising rates, credit unions can continue to play a greater role by offering members more competitive rates. For many consumers, a casual weekend trip to the auto mall turns into a big new purchase. Unfortunately, many get caught up in researching the vehicle and don’t think to shop for financing options until they’re in the F&I office. With approximately 25% share of total auto loan balances, credit unions have significant potential to recapture loans of existing members. Successful targeting starts with a review of your portfolio for opportunities with current members who have off-book loans that could be refinanced at a lower rate. After developing a strategy, many credit unions find success targeting these members with refinance offers. Helping members reduce monthly payments and interest expense provides an unexpected service that can deepen loyalty and engagement. But what criteria should you use to identify prospects? Target Receptive Consumers As originations continue to slow, marketing response rates will as well, leading to reduced marketing ROI. Maintaining performance is possible, but requires a proactive approach. Propensity models can help identify consumers who are more likely to respond, while estimated interest rates can provide insight on who is likely to benefit from refinance offers. Propensity models identify who is most likely to open a new trade. By focusing on these populations, you can cut a mail list in half or more while still focusing on the most viable prospects. It may be okay in a booming economy to send as many offers as possible, but as things slow down, getting more targeted can maintain campaign performance while saving resources for other projects. When it comes to recapture, consumers refinance to reduce their payment, interest rate, or both. Payments can often be reduced simply by ‘resetting’ the clock on a loan, or taking the remaining balance and resetting the term. Many consumers, however, will be aware of their current interest rate and only consider offers that reduce the rate as well. Estimated interest rates can provide valuable insight into a consumer’s current terms. By targeting those with high rates, you are more likely to make an offer that will be accepted. Successful targeting means getting the right message to the right consumers. Propensity models help identify “who” to target while estimated interest rates determine “what” to offer. Combining these two strategies will maximize results in even the most challenging markets. Lend Deeper with Trended Data Much of the growth in the auto market has been driven by relatively low-risk consumers, with more than 60% of outstanding balances rated prime and above. This means hypercompetition and great rates for the best consumers, while those in lower risk tiers are underserved. Many lenders are reluctant to compete for these consumers and avoid taking on additional risk for the portfolio. But trended data holds the key to finding consumers who are currently in a lower risk tier but carry significantly less risk than their current score suggests. In fact, historical data can provide much deeper insight on a consumer’s past use of credit. As an example, consider two consumers with the same risk score at a point in time. While they may be judged as carrying similar risk, trended data shows one has taken out two new trades in the past 6 months and has increasing utilization, while the other is consolidating and paying down balances. They may have the same risk score today, but what will the impact be on your future profitability? Most risk scores take a snapshot approach to gauging risk. While effective in general, it misses out on the nuance of consumers who are trending up or down based on recent behavior. Trended data attributes tell a deeper story and allow lenders to find underserved consumers who carry less risk than their current score suggests. Making timely offers to underserved consumers is a great way to grow your portfolio while managing risk. Uncertain Future The automotive industry has been a bright spot for the US economy for several years. It’s difficult to say what will happen in 2017, but there will likely be a continued slowing in originations. When markets get more competitive, data-driven targeting becomes even more important. Propensity models, estimated interest rates, and trended data should be part of every prescreen campaign. Those that integrate them now will likely shrug off any downturn and continue growing their portfolio by providing valuable and timely offers to their members.
As temperatures climb, so do automotive sales, which often reach annual highs during the warmest months of the year.
According to the latest State of the Automotive Finance Market report, a record 55.5% of all used vehicles were financed in Q2 2015, compared to 53.8% the previous year.
Auto lending success: Issues within auto lending are unique to other financial services ecosystems. The challenge for many lenders is to…
Key drivers to auto financial services are speed and precision. What model year is your decisioning system? In the auto world the twin engineering goals are performance and durability. Some memorable quotes have been offered about the results of all that complex engineering. And some not so complex observations. The world of racing has offered some best examples of the latter. Here’s a memorable one: “There’s no secret. You just press the accelerator to the floor and steer left. – Bill Vukovich When considering an effective auto financial services relationship one quickly comes to the conclusion that the 2 key drivers of an improved booking rate is the speed of the decision to the consumer/dealer and the precision of that decision – both the ‘yes/no’ and the ‘at what rate’. In the ‘good old days’ a lender relied upon his dealer relationship and a crew of experienced underwriters to quickly respond to a sales opportunities. Well, these days dealers will jump to the service provider that delivers the most happy customers. But, for all too many lenders some automated decisioning is leveraged but it is not uncommon to still see a significantly large ‘grey area’ of decisions that falls to the experienced underwriter. And that service model is a failure of speed and precision. You may make the decision to approve but your competition came in with a better price at the same time. His application got booked. Your decision and the cost incurred was left in the dust – bin. High on the list of solutions to this business issue is an improved use of available data and decisioning solutions. Too many lenders still underutilize available analytics and automated decisions to deliver an improved booking rate. Is your system last year’s model? Does your current underwriting system fully leverage available third party data to reduce delays due to fraud flags. Is your ability to pay component reliant upon a complex application or follow-up requests for additional information to the consumer? Does your management information reporting provide details to the incidence and disposition of all exception processes? Are you able to implement newer analytics and/or policy modifications in hours or days versus sitting in the IT queue for weeks or months? Can you modify policies to align with new dealer demographics and risk factors? The new model is in and Experian® is ready to help you give it a ride. Purchase auto credit data now.