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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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By: Kari Michel Lenders want to find new customer through more informed credit risk decisions and use new types of data relationships to cross-sell. The strategic goals of any company are to get more customers and revenue while reducing costs on the operating side and the credit loss side. Some of the ways to meet these goals are to improve operating efficiency in creating and managing credit attributes, which represent the building blocks of how lenders make customer decisions. Lenders face many challenges in leveraging data from multiple credit and non-credit sources (e.g. credit bureaus) and maintaining data attributes across multiple systems. Furthermore, a lack of access to raw data makes it difficult to create effective, predictive attributes. Simply managing the discrepancies between specifications and code can become a very time consuming effort. Maintaining a common set of attributes used in many types of scorecards and decision types often becomes difficult. As a result, there is a heavy reliance on external people and technical resources to find the right tools to try and pull the data sources and attributes together. In an ideal situation, a lender should be able to easily access raw data elements across multiple sources and aggregate the data into meaningful attributes. Experian can offer these capabilities through its Attribute Toolbox product, allowing one or more systems to access a common set of standard analytics. A set of highly predictive attributes, Premier Attributes, are available and offers a much more effective solution for managing standard attributes across an enterprise. With the use of these tools, lenders can decrease maintenance costs by quickly integrating data and analytics into existing business architecture to make profitable decisions.
By: Tom Hannagan An autonomic movement describes an action or response that occurs without conscious control. This, I fear, may be occurring at many banks right now related to their risk-based pricing and profit picture for several reasons. First, the credit risk profile of existing customers is subject to continuous change over time. This was always true to some extent. But, as we’ve seen in the latest economic recession, there can be a sizeable risk level migration if enough stress is applied. It is most obvious in the case of delinquencies and defaults, but is also occurring with customers that have performing loans. The question is: how well are we keeping up with the behind-the-scenes changes risk ratings/score ranges? The changes in relative risk levels of our clients are affecting our risk-based profit picture — and required capital allocation — without conscious action on our part. Second, the credit risk profile of collateral categories is also subject to change over time. Again, this is not exactly new news. But, as we’ve seen in the latest real estate meltdown and dynamics affecting the valuation of financial instruments, to name two, there can be huge changes in valuation and loss ratios. And, this occurs without making one new loan. These changes in relative loss-given-default levels are affecting our risk-based expected loss levels, risk-adjusted profit and capital allocation, in a rather autonomic manner. Third, aside from changes in risk profiles of customers and collateral types, the bank’s credit policy may change. The risk management analysis of expected credit losses is continuously (we presume) under examination and refinement by internal credit risk staff. It is certainly getting unprecedented attention by external regulators and auditors. These policy changes need to be reflected in the foundation logic of risk-based pricing and profit models. And that’s just in the world of credit risk. Fourth, there can also be changes in our operating cost structure, including mitigated operational risks, and product volumes that affect the allocation of risk-based non-interest expense to product groups and eventually to clients. Although it isn’t the fault of our clients that our cost structure is changing, for better or worse, we nonetheless expect them to bear the burden of these expenses based on the services we provide to them. Such changes need to be updated in the risk-based profit calculations. Finally, there is the market risk piece of risk management. It is possible if not likely that our ALCO policies have changed due to lessons from the liquidity crisis of 2008 or the other macro economic events of the last two years. Deposit funds may be more highly valued, for instance. There may also be some rotation in assets from lending. Or, the level of reliance on equity capital may have materially changed. In any event, we are experiencing historically low levels for the price of risk-free (treasury rate curve) funding, which affects the required spread and return on all other securities, including our fully-at-risk equity capital. These changes are occurring apart from customer transactions, but definitely affect the risk-based profit picture of each existing loan or deposit account and, therefore, every customer relationship. If any, let alone all, of the above changes are not reflected in our risk-based performance analysis and reporting, and any pricing of new or renewed services to our customers, then I believe we are involved in autonomic changes in risk-based profitability.
By:Wendy Greenawalt In my last few blogs, I have discussed how optimizing decisions can be leveraged across an organization while considering the impact those decisions have to organizational profits, costs or other business metrics. In this entry, I would like to discuss how this strategy can be used in optimizing decisions at the point of acquisition, while minimizing costs. Determining the right account terms at inception is increasingly important due to recent regulatory legislation such as the Credit Card Act. These regulations have established guidelines specific to consumer age, verification of income, teaser rates and interest rate increases. Complying with these regulations will require changes to existing processes and creation of new toolsets to ensure organizations adhere to the guidelines. These new regulations will not only increase the costs associated with obtaining new customers, but also the long term revenue and value as changes in account terms will have to be carefully considered. The cost of on-boarding and servicing individual accounts continues to escalate, and internal resources remain flat. Due to this, organizations of all sizes are looking for ways to improve efficiency and decisions while minimizing costs. Optimization is an ideal solution to this problem. Optimized strategy trees can be easily implemented into current processes and ensure lending decisions adhere to organizational revenue, growth or cost objectives as well as regulatory requirements. Optimized strategy trees enable organizations to create executable strategies that provide on-going decisions based upon optimization conducted at a consumer level. Optimized strategy trees outperform manually created trees as they are created utilizing sophisticated mathematical analysis and ensure organizational objectives are adhered to. In addition, an organization can quantify the expected ROI of a given strategy and provide validation in strategies – before implementation. This type of data is not available without the use of a sophisticated optimization software application. By implementing optimized strategy trees, organizations can minimize the volume of accounts that must be manually reviewed, which results in lower resource costs. In addition, account terms are determined based on organizational priorities leading to increased revenue, retention and profitability.
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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.