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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 Andrew Gulledge General configuration issues Question selection- In addition to choosing questions that generally have a high percentage correct and fraud separation, consider any questions that would clearly not be a fit to your consumer population. Don’t get too trigger-happy, however, or you’ll have a spike in your “failure to generate questions” rate. Number of questions- Many people use three or four out-of-wallet questions in a Knowledge Based Authentication session, but some use more or less than that, based on their business needs. In general, more questions will provide a stricter authentication session, but might detract from the customer experience. They may also create longer handling times in a call center environment. Furthermore, it is harder to generate a lot of questions for some consumers, including thin-file types. Fewer Knowledge Based Authentication questions can be less invasive for the consumer, but limits the fraud detection value of the KBA process. Multiple choice- One advantage of this answer format is that it relies on recognition memory rather than recall memory, which is easier for the consumer. Another advantage is that it generally prevents complications associated with minor numerical errors, typos, date formatting errors and text scrubbing requirements. A disadvantage of multiple-choice, however, is that it can make educated guessing (and potentially gaming) easier for fraudsters. Fill in the blank- This is a good fit for some KBA questions, but less so with others. A simple numeric answer works well with fill in the blank (some small variance can be allowed where appropriate), but longer text strings can present complications. While undoubtedly difficult for a fraudster to guess, for example, most consumers would not know the full, official and (correct spelling) of the name to which they pay their monthly auto payment. Numeric fill in the blank questions are also good candidates for KBA in an IVR environment, where consumers can use their phone’s keypad to enter the answers.
A recent New York Times (1) article outlined the latest release of credit borrowing by the Federal Reserve, indicating that American’s borrowed less for the ninth-straight month in October. Nested within the statistics released by the Federal Reserve were metrics around reduced revolving credit demand and comments about how “Americans are borrowing less as they try to replenish depleted investments.” While this may be true, I tend to believe that macro-level statements are not fully explaining the differences between consumer experiences that influence relationship management choices in the current economic environment. To expand on this, I think a closer look at consumers at opposite ends of the credit risk spectrum tells a very interesting story. In fact, recent bank card usage and delinquency data suggests that there are at least a couple of distinct patterns within the overall trend of reducing revolving credit demand: • First, although it is true that overall revolving credit balances are decreasing, this is a macro-level trend that is not consistent with the detail we see at the consumer level. In fact, despite a reduction of open credit card accounts and overall industry balances, at the consumer-level, individual balances are up – that’s to say that although there are fewer cards out there, those that do have them are carrying higher balances. • Secondly, there are significant differences between the most and least-risky consumers when it comes to changes in balances. For instance, consumers who fall into the least-risky VantageScore® tiers, Tier A and B, show only 12 percent and 4 percent year-over-year balance increases in Q3 2009, respectively. Contrast that to the increase in average balance for VantageScore F consumers, who are the most risky, whose average balances increased more than 28 percent for the same time period. So, although the industry-level trend holds true, the challenges facing the “average” consumer in America are not average at all – they are unique and specific to each consumer and continue to illustrate the challenge in assessing consumers' credit card risk in the current credit environment. 1 http://www.nytimes.com/2009/12/08/business/economy/08econ.html
In my last blog, I discussed the presence of strategic defaulters and outlined the definitions used to identify these consumers, as well as other pools of consumers within the mortgage population that are currently showing some measure of mortgage repayment distress. In this section, I will focus on the characteristics of strategic defaulters, drilling deeper into the details behind the population and learning how one might begin to recognize them within that population. What characteristics differentiate strategic defaulters? Early in the mortgage delinquency stage, mortgage defaulters and cash flow managers look quite similar – both are delinquent on their mortgage, but are not going bad on any other trades. Despite their similarities, it is important to segment these groups, since mortgage defaulters are far more likely to charge-off and far less likely to cure than cash flow managers. So, given the need to distinguish between these two segments, here are a few key measures that can be used to define each population. Origination VantageScore® credit score • Despite lower overall default rates, prime and super-prime consumers are more likely to be strategic defaulters Origination Mortgage Balance • Consumers with higher mortgage balances at origination are more likely to be strategic defaulters, we conclude this is a result of being further underwater on their real estate property than lower-balance consumers Number of Mortgages • Consumers with multiple first mortgages show higher incidence of strategic default. This trend represents consumers with investment properties making strategic repayment decisions on investments (although the majority of defaults still occur on first mortgages where the consumer has only one first mortgage) Home Equity Line Performance • Strategic defaulters are more likely to remain current on Home Equity Lines until mortgage delinquency occurs, potentially a result of drawing down the HELOC line as much as possible before becoming delinquent on the mortgage Clearly, there are several attributes that identify strategic defaulters and can assist in differentiating them from cash flow managers. The ability to distinguish between these two populations is extremely valuable when considering its usefulness in the application of account management and collections management, improving collections, and loan modification, which is my next topic. Source: Experian-Oliver Wyman Market Intelligence Reports; Understanding strategic default in mortgage topical study/webinar, August 2009.
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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.