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By: Scott Rhode This is the third and last of a three-part blog series focused on the residential solar market looking at; 1) the history of solar technology, 2) current trends and financing mechanisms, and finally 3) overcoming market and regulatory challenges with Experian’s help. As we’ve discussed in the two previous blogs, the residential solar industry in the US has experienced tremendous growth and much of that growth is attributed to financing. As the financing offers continue to evolve and mature, there are challenges that the industry faces. The first, and most obvious challenge, is that the Solar Investment Tax Credit is set to expire on December 31st, 2016. (To be clear, the credit is not eliminated on Dec. 31, 2016, it is simply planned to be reduced to 10%) Given the state of affairs in Washington, it is unlikely that the tax credit will get extended. This is unfortunate since this tax credit has been a catalyst for investment in this industry, greatly increasing affordability and adoption from the public. Once this incentive expires, the solar companies will need to acquire capital from more traditional sources (Debt markets, securitization, or other third party financing) to fund their growth since the Tax Equity community may no longer be willing to invest. In addition, the expiration of the credit means that panel manufactures must find ways to reduce the cost of production and that finance and installation companies must lower their customer acquisition cost since they are unsustainable in a post-ITC world. A benefit of moving towards other means of funding is that the sophistication level of pre-screening, scoring, and portfolio management should improve dramatically. Today, the Tax Equity community drives all of the credit strategies and those strategies are actually holding solar companies back because of their simplicity. For example, most of the TE investors require that the customer have a 680 FICO score or better in order to get approval. They do not require a debt to income threshold to be met, nor do they look at other attributes or data points. This overly simplistic approach is meant to keep the TE investor out of difficult conversations of being in the “sub-prime” space; however, it greatly limits growth and it turns away good customers. Additionally, this approach does not consider the “essential use” nature of the product. When a customer becomes seriously delinquent, their panels get disconnected and their costs for energy go up more than the cost of their monthly lease payment. This ensures that, unlike an unsecured loan or credit card, the customer is more likely to pay this obligation since it is actually saving them money. This does not mean that the industry can approve everyone; however, it does mean that, with the right decisioning logic and scorecards, they can go much deeper into the credit pool without taking on huge risks. Another challenge for the industry is the shear rate of growth. There are new players in the market every day and even established firms have a hard time keeping up with the growth. This leaves the individual organization and industry at risk for missing critical compliance steps in their operations. Given that these financial instruments are long term in nature and more consumers are adopting this as a means to get solar, it is only a matter of time before the regulators start to look into the practices and operating processes to ensure that all of the applicable regulations are being followed. The industry, as a whole, needs to ensure that they spend a little money now shoring up their compliance instead of paying a hefty fine later. Finally, what happens at the end of the lease? Many of the large players have taken a conservative approach as to how they price the residual amount at the end of term; however, no one really knows what these assets will be worth in 20 years. While many of the panel manufacturers warrant performance for 25, many panels have a shelf-life of 40 years, so how will consumers and the industry behave? What happens if there is a technological breakthrough in 10 years and those old panels are obsolete? At the moment, the industry’s answer to these questions is to set a very low residual which carries risk. Being too conservative here means that your customer’s payment is higher than it needs to be, pricing yourself out of certain markets where the cost of power is less than 20 cents / kwh. As the lease product continues to mature, more focus and emphasis on residual pricing will need to take place to find the right balance for the Consumer and the finance company. It should be said that while there are risks associated with this industry, all markets and new financing products carry risks. The goal of this particular blog is to highlight some of the larger risks that this industry faces. As these are identified, it is incumbent on the industry and partners of the industry to mitigate these risks so that consumers can continue to realize the power of solar. To close this series, I would be remiss if I didn’t offer up Experian’s Global Consultancy solutions to help address the challenges that the industry faces. Our knowledge of best practices in the financial services industry allows us to help those companies in the solar market grow originations responsibly, meet their regulatory requirements, and manage their long term risks with customers. While we cannot solve the funding issues, we can work with organizations and the tax equity community to educate them on the power of decisioning beyond a simple “one-size fits all” score. In addition, our products and data allow for flexibility and certainty, giving the industry an edge in acquiring new customers in a more efficient and less expensive manner. Finally, we can help provide advice and best practices in decisioning, risk management, and regulatory compliance so that the industry can continue to grow and thrive. All in all, we are advocates for the industry and can bring tremendous expertise and experience to help ensure continued success. Solar Financing – The current and future catalyst behind the booming residential solar market (Part II) Solar Financing — The current and future catalyst behind the booming residential solar market (Part I)
By: Mike Horrocks I was raised in an underbanked home! I have known this for a long time, but it feels great to say it and be proud of it. I was raised in Neola, Utah, a small cattle ranching community of at the time 500 or so people. I don’t recall as a kid ever feeling poor or on the edge financially, in fact it was quite the opposite. When I was a freshman in college I got my own banking accounts and my first major credit card that gave cash back, it all just seemed normal. I recall showing my dad my new found financial life. The concept of getting cash back for purchases was something he wanted in on. He made the call to get his own card and within minutes the representative on the other end of the call asked if I was willing to co-sign for my dad because he did not have a thick enough credit file. At this point of my dad’s life, he had developed and sold a couple of businesses, bought and managed a successful angus cattle ranch – but he had done most of it in cash and so he was “off the grid”. When I co – signed for my dad, it hit me, in terms of the banking system that I was studying at the university, we were an underbanked family! So what are the lessons learned here for a banker today: Underbanked does not equal poor. I never felt poor, the family business was going great, and my dad was always able to meet any obligation or need for the ranch and us kids. Bankers need to know their customers. When my dad did need access to more capital, there was a great banker at Zions Bank that knew my dad and stood by him even though the traditional file was thin. So know your customers by all means (traditional credit, alternative data, etc.) Don’t forget the family. By this I mean the associated products and what they can mean to the overall customer picture and relationship. Know what risks and opportunities are there as you try to optimize the relationship. If you want to read some more, American Banker just published a great set of articles on including consumers and how to retain them – it is worth a quick review. Don’t let great customers like my dad go through your business development net. Attract them, nurture them and build great relationships with them.
By: Barbara Rivera Every day, 2.5 quintillion bytes of data are created – in fact, 90% of the world’s data was created in only the last few years. With the staggering amount of data available, we have an unprecedented opportunity to uncover new insights and improve the way our world functions. The implications of these new capabilities are perhaps nowhere else as crucial as within our government. Public sector officials carry the great responsibility of conducting complex missions that directly affect our communities, our economy, and our nation’s future. The ability to make more informed, insightful choices and better decisions is paramount. Especially at a time of broader global unrest and uncertainty, Americans rely on our government to be transparent, fair, ready and to make the right decisions – our trust is in the hands of our elected officials and public servants. Data alone is not enough to inform and affect change. However, with integrated information assets, insightful analysts and collaborative processes, data can be transformed into something meaningful and actionable. Our government has already begun leveraging data for good across agencies and varied missions, with more potential unlocked each day. Local governments like Orange County, California are utilizing data through address verification services to keep their voting lists accurate – ensuring the integrity of elections and saving the taxpayers thousands of dollars otherwise wasted on mailings to outdated lists. The Orange County Registrar of Voters – the fifth largest voting jurisdiction in the county – has been able to cancel 40,000 voting records, with an estimated savings of $94,000 expected from 2012 through 2016. The examples are numerous and growing: A suite of optimization tools helps states find non-custodial parents, determine their capacity and likelihood to pay child support, and trigger alerts with new critical information, maximizing the likelihood of payment and recovery, ultimately improving the welfare of children and reducing poverty More than 150 state, county and local law enforcement agencies leverage data to help identify persons of interest, conduct background screening for employees and contractors and provide financial backgrounds for criminal investigations, ensuring our continued safety By using the power of data to manage user authentication, credentials and access controls, the government is working harder – and smarter – to protect our security The government is leveraging verified commercial data to help agencies validate the fiscal responsibility of potential contractors and monitor existing contractors, which helps provide transparency and reduce risk By using data and analytics to authenticate applicants and validate financial data, the government is ensuring access to benefits for those who meet eligibility requirements, while at the same time reducing fraud Private sector partners are supporting municipal efforts to improve financial stability in households by providing the current credit standing of consumers and monitoring overall changes in financial behaviors over time, to help counsel and educate citizens And that’s only the beginning. The possibilities are endless – from healthcare to finance to energy – data can be leveraged for the advancement of our society. It even happens behind the scenes, working to protect information in ways most citizens never realize. Data insights are used to ensure citizens have secure online access to their information – ever see those randomized, personal questions? That’s data at work. The same technology is the de facto ID Proofing standard for the VA and CMS. How does it all work? By combing through the data carefully, putting it in context, looking at it in new ways, and thinking about what all this information really means. Much of this is made possible through public-private partnerships between the government and companies like Experian. So the next time someone complains about the slow pace of government, let them know the truth is government is moving quickly, leveraging data and private sector partnerships to uncover new insights that impact the greater good.
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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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