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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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Consumer behavior and payment trends are constantly evolving, particularly in a rapidly changing economic environment. Faced with changing demands, including an accelerated shift to digital communications, and new regulatory rules, debt collectors must adapt to advance in the new collections landscape. According to Experian research, as of August, the U.S. unemployment rate was at 8.4%, with numerous states still having employment declines over 10%. These triggers, along with other recent statistics, signal a greater likelihood of consumers falling delinquent on loans and credit card payments. The issue for debt collectors? Many debt collection departments and agencies are not equipped to properly handle the uptick in collection volumes. By refining your process and capabilities to meet today’s demands, you can increase the success rate of your debt collection efforts. Join Denise McKendall, Experian’s Director of Collection Solutions, and Craig Wilson, Senior Director of Decision Analytics, during our live webinar, "Adapting to the New Collections Landscape," on October 21 at 10:00 a.m. PT. Our expert speakers will provide a view of the current collections environment and share insights on how to best adapt. The agenda includes: Meeting today’s collections challenges A Look at the state of the market Devising strategies and solving collections problems across the debt lifecycle Register now
Profitability analysis is one of the most powerful analytics tools in business and strategy development. Yet it’s underrated, deemed too complicated and often ignored. A chief lending officer may state that the goal of strategy development is to increase approvals or to reduce losses. Each one of these goals has an impact generally inversely on each other. That impact may be consequential, and evaluating the effects requires deeper thought and discipline. I propose that the benefits of a profitability analysis in strategy development are worth the additional effort, time and cost. Profitability analysis provides a disciplined framework for making business decisions. For financial companies, a simple profit and loss (P&L) statement will identify interest income, subtract losses and arrive at a risk-adjusted yield. A more robust P&L statement will include interest expense, loss reserves, recovery, fees and other income, operating expenses, other cost per account, and net income. Whether simplified or fully loaded, a P&L analysis used in strategy development must provide a clear and informative representation of key performance metrics and risks. The most important benefit of a profitability analysis is its inherent ability to quantify the trade-offs between risk and rewards. In the P&L terminology, we mean the trade-off between expenses and revenue or losses and interest income. Understanding trade-offs allows companies to make informed decisions and explore serious alternatives. The net income is a concise and elegant metric that captures the impact of various and sometimes competing business objectives. Consider different divisions within a financial organization. Each division has its own specific and measurable objective. Marketing’s goal is to increase loan approvals while Risk is tasked with managing losses. Operations looks to improve efficiencies while IT aims to provide stable, reliable and accurate systems infrastructure. Legal and Compliance ensure regulatory compliance across the entire organization. Each division working to achieve its objectives creates externalities — each division’s actions may not fully incorporate costs imposed on other divisions. For example, targeting highly responsive consumers for a loan product achieves higher loan approvals and may in turn lead to higher credit risk losses. A P&L analysis imposes the discipline for each division to internalize costs and lead to a favorable and efficient outcome for the organization. The challenge with profitability analysis in strategy development is how to develop a good P&L statement. We look to historical data to define assumptions and calibrate inputs to the P&L. There will be uncertainty and concerns regarding the reliability and quality of such data. Organizations don’t regularly conduct test and control experiments or champion and challenger strategies that provide actual performance information on specific areas of studies. Though imperfect, historical data provides a starting foundation for profitability analysis. We augment historical data with predictive credit attributes, industry experience and understanding consumer behavior and incentives. For example, to estimate interest income we may utilize estimated interest rates combined with balance propensity behavior, such as a balance revolver or transactor. To estimate losses on declined population that may be considered for approval, we infer on-us performance using off-us performance with other lenders. Defining assumptions is tedious, hard work and full of uncertainty. This exercise once again imposes the discipline required of organizations to know in detail the characteristics of their products and businesses that make them relevant to consumers. We generate P&L simulations using a set of assumptions, acknowledge the data limitations and evaluate recommendations. A profitability analysis is useful in both times of economic expansion and contraction. A P&L analysis is valuable when evaluating strategies across the customer life cycle. Remember, we live in a world of trade-offs and choices are inevitable. In the prospecting and acquisition life cycle, a P&L analysis provides insights on approval expansion and the consequences of higher credit losses. Alternatively, tighter lending criteria will have a direct impact on balance growth and interest income with lower losses. In account management, a P&L analysis provides estimates on expanded account authorization limits and the effect on activation and usage. In collections, a P&L analysis provides valuation on recoveries and operational costs. These various assessments are quantified in the P&L and allows the organization to identify other mechanisms such as marketing campaigns, customer services or technology investments in support of the organization’s goals and mission. Organizations face a full spectrum of opportunities and risks. We propose a profitability analysis to evaluate business trade-offs, navigate the marketplace, and continue to provide relevant financial products and services to consumers and businesses. Learn more
Affordability has been the topic of conversation across the automotive industry over the past several years, and with COVID-19, the spotlight is even brighter, particularly as average loan amounts continue to grow. To find ways to stay within budget, many consumers were swayed by manufacturer incentives, while others have stretched their loan terms to make their monthly payments manageable. In fact, the average new vehicle loan term reached 71.54 months in Q2 2020, up from 67.97 months during the same quarter just five years ago. On the surface, some are concerned about the extension of loan terms, as it can make vehicles more expensive in the long run or cause financial hardship for consumers, but that may not necessarily be the case. Prime consumers seek longer term new loans While the average loan term for a new vehicle is almost six years, not every consumer is choosing long term financing. The consumers with the highest increase in loan terms fell into low-risk categories. For instance, super prime consumers showed the largest increase of 3.71 months compared to last year, while prime consumers increased their loan terms by 2.57 months in the same time frame. In addition, the longest loans—those with 85-96-month terms—belonged to consumers with an average credit score of 720 in Q2 2020, up from 703 one year ago. Some industry pundits believe longer term loans open consumers up to potential default, but the fact that low-risk consumers account for the most significant increases in terms, should quell some of the concern. Longer Terms Keep Monthly Payments Down The extension of loan terms coincides with significant increases in the average loan amount for a new vehicle—which increased nearly $4,000 in Q2 2020. Much of that increase has been driven by consumer preferences as full-sized pickups became the most financed new vehicle. Even with an increase in loan amounts, when combined with extended terms, monthly payments for new loans have only increased slightly and have remained relatively on par with last year. The average monthly payment increased $18 year-over-year, with the average monthly payment coming in at $568. To understand the impact that extended loan terms can have on the monthly payment, let’s take the average loan amount for a new vehicle ($36,072) and the average interest rate (5.15%). With 60-month terms, the monthly payment would be approximately $683, while with 72-month terms, the monthly payment would cost about $583. So, while there is an increase in new loan amounts, consumers are finding ways to manage their payments, and longer loan terms have played a significant role in that. Making Financing a Vehicle More Affordable Another contributing factor that minimizes the likelihood of default with longer loans is lower interest rates. The average interest rate for a new vehicle is 5.15% as of Q2 2020, down from 6.25% in Q2 2019. That means, choosing a longer-term loan won’t have the same impact as previous years. As consumers’ financial situations will likely remain dynamic in the coming months, lenders should work with consumers to ensure that their loan options fit their needs, to make vehicle purchases more enticing and help them stay within budget. Consumers are taking advantage of new car incentives, low interest rates and longer-term loans in order to ensure that their vehicle purchase is manageable. But, with the long-term effects of COVID-19 still unknown, it’s important for lenders to ensure they’re helping consumers make the best possible decisions. Understanding trends in the auto finance market can better position lenders and dealers to provide the best, most affordable options for each consumer. To view the full Q2 2020 State of the Automotive Finance Market report, 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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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.