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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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For the past couple years, the deterioration of the real estate market and the economy as a whole has been widely reported as a national and international crisis. There are several significant events that have contributed to this situation, such as, 401k plans have fallen, homeowners have simply abandoned their now under-valued properties, and the federal government has raced to save the banking and automotive sectors. While the perspective of most is that this is a national decline, this is clearly a situation where the real story is in the details. A closer look reveals that while there are places that have experienced serious real estate and employment issues (California, Florida, Michigan, etc.), there are also areas (Texas) that did not experience the same deterioration in the same manner. Flash forward to November, 2009 – with signs of recovery seemingly beginning to appear on the horizon – there appears to be a great deal of variability between areas that seem poised for recovery and those that are continuing down the slope of decline. Interestingly though, this time the list of usual suspects is changing. In a recent article posted to CNN.com, Julianne Pepitone observes that many cities that were tops in foreclosure a year ago have since shown stabilization, while at the same time, other cities have regressed. A related article outlines a growing list of cities that, not long ago, considered themselves immune from the problems being experienced in other parts of the country. Previous economic success stories are now being identified as economic laggards and experiencing the same pains, but only a year or two later. So – is there a lesson to be taken from this? From a business intelligence perspective, the lesson is generalized reporting information and forecasting capabilities are not going to be successful in managing risk. Risk management and forecasting techniques will need to be developed around specific macro- and micro-economic changes. They will also need to incorporate a number of economic scenarios to properly reflect the range of possible future outcomes about risk management and risk management solutions. Moving forward, it will be vital to understand the differences in unemployment between Dallas and Houston and between regions that rely on automotive manufacturing and those with hi-tech jobs. These differences will directly impact the performance of lenders’ specific footprints, as this year’s “Best Place to Live” according to Money.CNN.com can quickly become next year’s foreclosure capital. ihttp://money.cnn.com/2009/10/28/real_estate/foreclosures_worst_cities/index.htm?postversion=2009102811 iihttp://money.cnn.com/galleries/2009/real_estate/0910/gallery.foreclosures_worst_cities/2.html
By: Wendy Greenawalt Optimization has become a "buzz word" in the financial services marketplace, but some organizations still fail to realize all the possible business applications for optimization. As credit card lenders scramble to comply with the pending credit card legislation, optimization can be a quick and easily implemented solution that fits into current processes to ensure compliance with the new regulations. Optimizing decisions Specifically, lenders will now be under strict guidelines of when an APR can be changed on an existing account, and the specific circumstances under which the account must return to the original terms. Optimization can easily handle these constraints and identify which accounts should be modified based on historical account information and existing organizational policies. APR account changes can require a great deal of internal resources to implement and monitor for on-going performance. Implementing an optimized strategy tree within an existing account management strategy will allow an organization to easily identify consumer level decisions. This can be accomplished while monitoring accounts through on-going batch processing. New delivery options are now available for lenders to receive optimized strategies for decisions related to: Account acquisition Customer management Collections Organizations who are not currently utilizing this technology within their processes should investigate the new delivery options. Recent research suggests optimizing decisions can provide an improvement of 7-to-16 percent over current processes.
In my last blog, I discussed the basic concept of a maturation curve, as illustrated below: Exhibit 1 In Exhibit 1, we examine different vintages beginning with those loans originated by year during Q2 2002 through Q2 2008. The purpose of the vintage analysis is to identify those vintages that have a steeper slope towards delinquency, which is also known as delinquency maturation curve. The X-axis represents a timeline in months, from month of origination. Furthermore, the Y-axis represents the 90+ delinquency rate expressed as a percentage of balances in the portfolio. Those vintage analyses that have a steeper slope have reached a normalized level of delinquency sooner, and could in fact, have a trend line suggesting that they overshoot the expected delinquency rate for the portfolio based upon credit quality standards. So how can you use a maturation curve as a useful portfolio management tool? As a consultant, I spend a lot of time with clients trying to understand issues, such as why their charge-offs are higher than plan (budget). I also investigate whether the reason for the excess credit costs are related to collections effectiveness, collections strategy, collections efficiency, credit quality or a poorly conceived budget. I recall one such engagement, where different functional teams within the client’s organization were pointing fingers at each other because their budget evaporated. One look at their maturation curves and I had the answers I needed. I noticed that two vintages per year had maturation curves that were pointed due north, with a much steeper curve than all other months of the year. Why would only two months or vintages of originations each year be so different than all other vintage analyses in terms of performance? I went back to my career experiences in banking, where I worked for a large regional bank that ran marketing solicitations several times yearly. Each of these programs was targeted to prospects that, in most instances, were out-of-market, or in other words, outside of the bank’s branch footprint. Bingo! I got it! The client was soliciting new customers out of his market, and was likely getting adverse selection. While he targeted the “right” customers – those with credit scores and credit attributes within an acceptable range, the best of that targeted group was not interested in accepting their offer, because they did not do business with my client, and would prefer to do business with an in-market player. Meanwhile, the lower grade prospects were accepting the offers, because it was a better deal than they could get in-market. The result was adverse selection…and what I was staring at was the "smoking gun" I’d been looking for with these two-a-year vintages (vintage analysis) that reached the moon in terms of delinquency. That’s the value of building a maturation curve analysis – to identify specific vintages that have characteristics that are more adverse than others. I also use the information to target those adverse populations and track the performance of specific treatment strategies aimed at containing losses on those segments. You might use this to identify which originations vintages of your home equity portfolio are most likely to migrate to higher levels of delinquency; then use credit bureau attributes to identify specific borrowers for an early lifecycle treatment strategy. As that beer commercial says – “brilliant!”
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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.