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of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries, but also the leap into electronic typesetting, remaining essentially unchanged. It was popularised in the 1960s with the release of Letraset sheets containing Lorem Ipsum passages, and more recently with desktop publishing software like Aldus PageMaker including versions of Lorem Ipsum
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Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
Inactive credit card accounts are defined as credit cards that were approved, opened and never used by account holders. They also include credit card accounts that were approved, opened, utilized by account holders but don’t have a balance for the last six to 12 months. Inactive credit card accounts pose several challenges and opportunities to lenders. A review of inactivity rates of credit card portfolios of credit unions across the United States as of March 2018 shows that inactive accounts comprise approximately 11 percent of total accounts on the books. The average credit line of inactive accounts is $8,700. (Data were extracted from Experian’s File One™ database using a sample of credit card accounts with credit unions across the United States as of March 2018. Sample size is approximately 600,000 credit card accounts.) Why do credit card accounts become inactive? One potential reason for inactivity is the convenience of securing a credit card during demand deposit account (“DDA”) opening processes. Lenders today may prequalify or preselect a customer quickly and efficiently for a credit card while a customer’s request to open a checking account or deposit account is being processed. Lenders benefit from this choreographed process with no to very minimal additional effort and time requested from the customer. The removal or significant decrease in friction costs — such as requiring additional customer information that previously would have deterred a customer from proceeding with the credit card application — gave lenders the advantage of processing more applications. (Schruder, Kyle. Feb. 26, 2018. The Top 5 Behavioural Economics Principles for Designers — Bridgeable blog. https://uxplanet.org/the-top-5-behavioural-economics-principles-for-designers-ea22a16a4020.) Because of this convenience, some customers say yes to obtaining a credit card even though they had no intention of securing one in the first place. In behavioral economics, this may be identified as the “yeah, whatever” heuristic. People take the option with the least effort or the path of least resistance. (Thaler, Richard H. and Cass R. Sunstein. 2009. Nudge Improving Decisions About Health, Wealth, and Happiness. New York: Penguin Books. Pages 35, 85.) With low commitment to the credit card, customers who are approved will receive the new plastic and forget about it. An active credit card user may become inactive because the features, benefits and rewards are no longer relevant for their current financial needs. For example, a merchandise purchase or balance transfer promotion has expired and was paid off. Rewards are less attractive compared to other credit card offers in the marketplace. Lack of lender engagement activities may also lead to inactivity. For example, there are no marketing campaigns with promotions or special rewards offers. Revolving accounts with very low credit lines aren’t given credit line increases even though credit risk is acceptable, and accounts generate good interest income. The challenges to lenders with a large segment of inactive accounts include the direct cost of contingent liability. A percentage of unused credit lines is classified as contingent liability in the balance sheet. If contingent liability is reduced, then funds may be used to invest in more productive activities. In the absence of analytics and deep understanding of various customer behaviors in the portfolio, it can become costly for a lender when inactive accounts are included in all kinds of marketing campaigns. Marketing budgets are limited and ought to be used wisely to target segments with high expected returns and to achieve specific and well-defined objectives. Inactive accounts may also come with credit risk challenges. Some customers designate certain credit cards as emergency credit cards. That is, these cards will be used only in emergency situations where payment is needed immediately, and no other funds can be easily accessed at such time. Some situations are significantly more serious and may be accompanied by deep financial stress. During these times, inactive accounts are utilized and may result in collections or charge-offs. How can lenders handle the challenges of inactive accounts? An inactive account strategy that uses data and analytics is very helpful and prudent. Determine which accounts are never active or were inactive within the last 12 months. Identify which accounts pose elevated credit risk. There are various interventions that can be designed to improve card activation, which may include marketing campaigns and account management strategies including credit line options. If inactive accounts were included in marketing campaigns or account management strategies, then track the performance. These performance reports will provide the rationale and guidelines for further action, which may include account closure. Evaluate the multiple relationships of the customer with the lender and estimated cardmember value. Survey the inactive accounts and obtain feedback regarding the reasons for lack of card usage. Those insights will help identify areas for improvement and drive new initiatives. We have seen that inactive accounts aren’t a trivial component of a credit card portfolio. There are real costs and risks associated with inactive accounts. They also provide opportunities for improving card features and benefits and ways to continue engaging existing cardmembers.
2020 has put a lot of industries on edge, the automotive industry included. Having experienced and recovered from many economic events over the years, dealers and the rest of the industry have had a ton of practice navigating these pitfalls. But reacting to these events on the fly can be troublesome and leave their operations vulnerable. What if there was a way to prepare ahead of time? The key to such insight is data. Last year is a testament to how quickly trends can shift, and entire industries can be turned upside down. It’s no longer enough to just react to the immediate challenges. Instead, it is crucial to be proactive. This means identifying and preparing for potential obstacles and challenges before they occur. And while we can’t predict what the future looks like, we can stay close to the trends as they are forming and adjust accordingly. Of course, this is easier said than done. Every economic event is unique, but there are certain occurrences that tend to happen during a crisis. Oftentimes, the unemployment rate increases, interest rates drop, and the housing market shifts, just to name a few. These events translate to changes in the auto industry as well. For example, according to Experian’s Automotive Market Insights dashboard, an increase in unemployment correlates with decreased vehicle registrations. At the onset of the pandemic, the unemployment rate dramatically increased to nearly 14%, while vehicle registrations decreased from 1.1 million at the beginning of the year to around 660,000 in April. But digging a little deeper, the dashboard also shows that the peak of unemployment predates a decline in vehicle registrations by approximately one month. With the ability to see how certain events impact the automotive industry, dealers can plan ahead and make adjustments that can support their business during turbulent times. Prepping for negative events is just one piece of the puzzle. Dealers must also find opportunity for growth during downturns. Identifying conquest opportunity is just one way dealers can expand their businesses. Knowing which consumers are coming off-lease, off-loan or are in positive equity in local surrounding areas can inform growth strategy and fuel sales. For instance, dealers may want to structure attractive lease and trade-in packages, ultimately helping to boost sales activity when it’s needed most. While we may not be able to predict any economic downturn, we can do our best to prepare for them. Data provides crucial insights that can help dealers avoid more stress than necessary during challenging chapters. Market trends ebb and flow, even more so during times of crisis. Staying close to the data allows dealers to take control of their businesses during what feels like an out-of-control situation and see their businesses through to more stable times.
To state the obvious, a lot has changed in the auto space in 2020. Every facet of the industry has been touched by the events of last year. Trends changed month-to-month, manufacturers temporarily halted production, consumer preferences shifted, digital retailing increased, and dealerships navigated inventory shortages. Out of the many events that defined the auto industry last year, perhaps the most intriguing has been the buying habits of Millennial and Gen Z vehicle buyers. While there continues to be much speculation about their interest in vehicle ownership, Millennials and Gen Z consumers have proven to be future trend shapers for the auto industry. According to Experian’s Q3 2020 Market Trends Review, Millennials and Gen Z are the only two generational segments of the automotive industry seeing growth. The report found that new vehicle registrations by Millennials through the third quarter increased from 26.4% last year, to 28.6% this year. Similarly, Gen Z saw growth from 3.0% to 4.2% over the same period. Overall, the type of vehicles both segments are interested in are not that different. In fact, Experian research shows that Millennials and Gen Z share interest in the same vehicles, but they rank them in a different order: The subtle change in the order of most popular vehicles reinforces the importance of reaching out to both generations differently when creating marketing strategies. While the two generations are often clumped together, the behaviors and interests can be quite different. So, how do you reach Millennials and Gen Z consumers? The answer lies with technology. Millennials are often credited for being the most tech savvy, while Gen Z is described as the first truly digital generation. Leveraging technology will be key to reaching this group of car buyers. According to Pew Research, 92% of Millennials say they own a smartphone, 53% own a tablet and 86% use social media. Meanwhile, Hootsuite data found that Gen Z prefers mobile devices, using a smartphone to visit an online retail store (80%), engage on social media (95%) and purchase a product online (61%). With an increased need to go digital, OEM’s and dealers must begin shifting their marketing and sales strategies to reach these consumers in ways that appeal to their browsing and purchasing preferences. The automotive landscape, including how car buyers shop for new vehicles, is changing. As Millennials and Gen Z continue to experience growth in automotive sales, and make up a larger segment of car buyers, it is important to tailor marketing campaigns to reach them. In doing so, OEM’s and dealers can meet consumers where they are, with offers that address their needs. To watch the full Q3 2020 Market Trends Review, click here.
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With the National Automobile Dealers Association (NADA) Show set to kickoff later this week, it seemed fitting to explore how the shifting dynamics of the used vehicle market might impact dealers and buyers over the coming year. Shedding light on some of the registration and finance trends, as well as purchasing behaviors, can help dealers and manufacturers stay ahead of the curve. And just like that, the Special Report: Automotive Consumer Trends Report was born. As I was sifting through the data, one of the trends that stood out to me was the neck-and-neck race between Millennials and Gen X for supremacy in the used vehicle market. Five years ago, in 2019, Millennials were responsible for 33.3% of used retail registrations, followed by Gen X (29.5%) and Baby Boomers (26.8%). Since then, Baby Boomers have gradually fallen off, and Gen X continues to close the already minuscule gap. Through October 2024, Millennials accounted for 31.6%, while Gen X accounted for 30.4%. But trends can turn on a dime if the last year offers any indication. Over the last rolling 12 months (October 2023-October 2024), Gen X (31.4%) accounted for the majority of used vehicle registrations compared to Millennials (30.9%). Of course, the data is still close, and what 2025 holds is anyone’s guess, but understanding even the smallest changes in market share and consumer purchasing behaviors can help dealers and manufacturers adapt and navigate the road ahead. Although there are similarities between Millennials and Gen X, there are drastic differences, including motivations and preferences. Dealers and manufacturers should engage them on a generational level. What are they buying? Some of the data might not come as a surprise but it’s a good reminder that consumers are in different phases of life, meaning priorities change. Over the last rolling 12 months, Millennials over-indexed on used vans, accounting for more than one-third of registrations. Meanwhile, Gen X over-indexed on used trucks, making up nearly one-third of registrations, and Gen Z over-indexed on cars (accounting for 17.1% of used car registrations compared to 14.6% of overall used vehicle registrations). This isn’t surprising. Many Millennials have young families and may need extra space and functionality, while Gen Xers might prefer the versatility of the pickup truck—the ability to use it for work and personal use. On the other hand, Gen Zers are still early in their careers and gravitate towards the affordability and efficiency of smaller cars. Interestingly, although used electric vehicles only make up a small portion of used retail registrations (less than 1%), Millennials made up nearly 40% over the last rolling 12 months, followed by Gen X (32.2%) and Baby Boomers (15.8%). The market at a bird’s eye view Pulling back a bit on the used vehicle landscape, over the last rolling 12 months, CUVs/SUVs (38.9%) and cars (36.6%) accounted for the majority of used retail registrations. And nearly nine-in-ten used registrations were non-luxury vehicles. What’s more, ICE vehicles made up 88.5% of used retail registrations over the same period, while alternative-fuel vehicles (not including BEVs) made up 10.7% and electric vehicles made up 0.8%. At the finance level, we’re seeing the market shift ever so slightly. Since the beginning of the pandemic, one of the constant narratives in the industry has been the rising cost of owning a vehicle, both new and used. And while the average loan amount for a used non-luxury vehicle has gone up over the past five years, we’re seeing a gradual decline since 2022. In 2019, the average loan amount was $22,636 and spiked $29,983 in 2022. In 2024, the average loan amount reached $28,895. Much of the decline in average loan amounts can be attributed to the resurgence of new vehicle inventory, which has resulted in lower used values. With new leasing climbing over the past several quarters, we may see more late-model used inventory hit the market in the next few years, which will most certainly impact used financing. The used market moving forward Relying on historical data and trends can help dealers and manufacturers prepare and navigate the road ahead. Used vehicles will always fit the need for shoppers looking for their next vehicle; understanding some market trends will help ensure dealers and manufacturers can be at the forefront of helping those shoppers. For more information on the Special Report: Automotive Consumer Trends Report, visit Experian booth #627 at the NADA Show in New Orleans, January 23-26.
The automotive industry is constantly changing. Shifting consumer demands and preferences, as well as dynamic economic factors, make the need for data-driven insights more important than ever. As we head into the National Automobile Dealers Association (NADA) Show this week, we wanted to explore some of the trends in the used vehicle market in our Special Report: State of the Automotive Finance Market Report. Packed with valuable insights and the latest trends, we’ll take a deep dive into the multi-faceted used vehicle market and better understand how consumers are financing used vehicles. 9+ model years grow Although late-model vehicles tend to represent much of the used vehicle finance market, we were surprised by the gradual growth of 9+ model year (MY) vehicles. In 2019, 9+MY vehicles accounted for 26.6% of the used vehicle sales. Since then, we’ve seen year-over-year growth, culminating with 9+MY vehicles making up a little more than 30% of used vehicle sales in 2024. Perhaps more interesting though, is who is financing these vehicles. Five years ago, prime and super prime borrowers represented 42.5% of 9+MY vehicles, however, in 2024, those consumers accounted for nearly 54% of 9+MY originations. Among the more popular 9+MY segments, CUVs and SUVs comprised 36.9% of sales in 2024, up from 35.2% in 2023, while cars went from 44.3% to 42.9% year-over-year and pickup trucks decreased from 15.9% to 15.6%. 2024 highlights by used vehicle age group To get a better sense of the overall used market, the segments were broken down into three age groups—9+MY, 4-8MY, and current +3MY—and to no surprise, the finance attributes vary widely. While we’ve seen the return of new vehicle inventory drive used vehicle values lower, it could be a sign that consumers are continuing to seek out affordable options that fit their lifestyle. In fact, the average loan amount for a 9+MY vehicle was $19,376 in 2024, compared to $24,198 for a vehicle between 4-8 years old and $32,381 for +3MY vehicle. Plus, more than 55% of 9+MY vehicles have monthly payments under $400. That’s not an insignificant number for people shopping with the monthly payment in mind. In 2024, the average monthly payment for a used vehicle that falls under current+3MY was $608. Meanwhile, 4-8MY vehicles came in at an average monthly payment of $498, and 9+MY vehicles had a $431 monthly payment. Taking a deeper dive into average loan amounts based on specific vehicle types—as of 2024, current +3MY cars came in at $28,721, followed by CUVs/SUVs ($31,589) and pickup trucks ($40,618). As for 4-8MY vehicles, cars came in with a loan amount of $22,013, CUVs/SUVs were at $23,133, and pickup trucks at $31,114. Used 9+MY cars had a loan amount of $19,506, CUVs/SUVs came in at $17,350, and pickup trucks at $22,369. With interest rates remaining top of mind for most consumers as we’ve seen them increase in recent years, understanding the growth from 2019-2024 can give a holistic picture of how the market has shifted over time. For instance, the average interest rate for a used current+3MY vehicle was 8.0% in 2019 and grew to 10.2% in 2024, the average rate for a 4-8MY vehicle went from 10.3% to 12.9%, and the average rate for a 9+MY vehicle increased from 11.4% to 13.8% in the same time frame. Looking ahead to the used vehicle market It’s important for automotive professionals to understand and leverage the data of the used market as it can provide valuable insights into trending consumer behavior and pricing patterns. While we don’t exactly know where the market will stand in a few years—adapting strategies based on historical data and anticipating shifts can help professionals better prepare for both challenges and opportunities in the future. As used vehicles remain a staple piece of the automotive industry, making informed decisions and optimizing inventory management will ensure agility as the market continues to shift. For more information, visit us at the Experian booth (#627) during the NADA Show in New Orleans from January 23-26.
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