Table of Contents
Executive Summary
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- The issues
- Millennials are more likely to use the most expensive forms of financing
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- Figure 1: Source of financing, by generation, March 2017
- Fewer are looking to loans for future purchases
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- Figure 2: Payment option, by timing of vehicle purchase, March 2017
- The opportunities
- Build relationships with existing customers to increase satisfaction
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- Figure 3: Attitudes toward loans and lenders, by generation, March 2017
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- Figure 4: Ally Auto email, 2016
- Interest rates are rising
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- Figure 5: Most important loan/lender benefits, March 2017
- One-stop shopping for car and loan
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- Figure 6: Attitudes toward loans and lending, by generation, March 2017
- What it means
The Market – What You Need to Know
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- Number of auto loans explodes
- Auto debt climbs higher
- Auto loan delinquency rates are rising
- Originations remain strong
- New car sales are down
- Interest rates
- Gas prices
Market Size
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- Number of auto loans explodes
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- Figure 7: Number of auto loans, Q4 2011-Q4 2016
- Auto debt climbs higher
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- Figure 8: Total and auto debt, Q4 2011-Q4 2016
- Higher delinquency rates are a potential warning
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- Figure 9: Percentage of loan balances 90+ days delinquent, Q4 2011-Q4 2016
- 30+ day delinquency balances are higher
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- Figure 10: New delinquent auto loan balances, Q4 2011-Q 4 2016
- Originations remain strong
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- Figure 11: Auto loan originations by credit score, Q4 2011- Q4 2016
Market Factors
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- New car sales are down
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- Figure 12: Total US unit sales of new and used cars and light trucks, 2011-16
- Interest rates
- Gas prices
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- Figure 13: US gasoline and diesel retail prices, January 2007-January 2017
- Longer-term loans are more popular
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- Figure 14: Preference for long-term loan, by gender and age, March 2017
Market Breakdown
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- Trends in sources of financing for new and used vehicles
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- Figure 15: Market share of new financing, Q4 2015-Q4 2016
- Figure 16: Market share of used financing, Q4 2015- Q4 2016
Key Players – What You Need to Know
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- One-stop shopping and lending online
- More ride sharing may lead to increased car sales
- Delinquencies may increase with higher interest rates
- Lack of trust in dealers is hurting lending efforts
- Ford is first manufacturer to combine online sales and lending
- Use of alternative data in determining creditworthiness
What’s Working?
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- One-stop shopping and lending online
- Carvana and Vroom.com
- Walmart
- Capital One
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- Figure 17: Capital One Auto Navigator statement stuffer, 2017
- Growth in car sharing could boost car sales
What’s Struggling?
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- Delinquencies may increase with higher interest rates
- Lack of trust in dealerships may be hurting their lending efforts
What’s Next?
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- Ford partners with AutoFi to eliminate trips to the dealer
- Use of alternative data in determining creditworthiness
- Clearlane from Ally Bank
The Consumer – What You Need to Know
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- Most are planning to buy a car relatively soon
- Near-term buyers more likely to be Hispanic
- New, not used, are most popular for next car purchase
- Loans are most popular payment option – but demand is decreasing
- Most buyers know how they will finance
- Interest rate is most important
- Lower-income households seek protection against financial hardship
- More would pay more upfront to get a lower rate
- Banks have advantage over dealerships
- Millennials most likely to prefer online loan shopping
- Young borrowers need guidance
Profile of Car Buyers
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- Most are planning to buy a car within the next three years
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- Figure 18: Car buying plans, by time to purchase, March 2017
- Men are more likely to buy
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- Figure 19: Car buying plans, by gender, March 2017
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- Figure 20: Chevrolet mobile ad, 2017
- Near-term buyers more likely to be Hispanic
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- Figure 21: Car purchase plans, by Hispanic origin, March 2017
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- Figure 22: Toyota print ad, 2017
- Parents will be in the vehicle market shortly
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- Figure 23: Car purchase plans, by parental status, March 2017
- Most buyers plan to trade in a car
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- Figure 24: Trade-in plans, March 2017
- New, not used, are most popular for next car purchase
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- Figure 25: Type of vehicle to be purchased next, March 2017
Most Likely Payment Method
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- Loans are most popular payment option
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- Figure 26: Most likely payment method, last vehicle purchased and next vehicle purchased, March 2017
- More Hispanics are planning to borrow
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- Figure 27: Most likely payment method, last vehicle purchased and next vehicle purchased, by Hispanic origin, March 2017
- Half of Gen X plans to get a vehicle loan
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- Figure 28: Most likely payment method for next vehicle purchased, by generation, March 2017
- CPO buyers are most likely to take a loan
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- Figure 29: Most likely payment method for next vehicle purchased, by type of vehicle, March 2017
Source of Financing
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- Most buyers know how they will finance
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- Figure 30: Source of financing, March 2017
- Millennials are more likely to use the most expensive forms of financing
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- Figure 31: Source of financing, by generation, March 2017
Most Important Loan/Lender Benefits
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- Interest rate is most important
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- Figure 32: Important loan/lender benefits, March 2017
- Hispanics want low monthly payments
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- Figure 33: Important loan/lender benefits, by Hispanic origin, March 2017
- Lower-income households seek protection against financial hardship
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- Figure 34: Important loan/lender benefits, by household income, March 2017
Loan Behavior
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- More would pay more upfront to get a lower rate
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- Figure 35: Loan behavior, by generation, March 2017
- Blacks are more concerned about financing upfront
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- Figure 36: Loan behavior, by race, March 2017
- Vehicle buying services appeal to women
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- Figure 37: Preference for vehicle buying service, by gender and age, March 2017
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- Figure 38: USAA car loan email
- Banks have advantage over dealerships
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- Figure 39: Loan behavior, by need to finance, March 2017
Attitudes toward Loans and Lending
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- Millennials most likely to prefer online loan shopping
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- Figure 40: Preference for online loan shopping, by generation, March 2017
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- Figure 41: Pacific Marine Credit Union auto loan direct mail postcard, 2017
- Young borrowers need guidance
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- Figure 42: Attitudes toward loans and lending, by gender and age, March 2017
CHAID Analysis – The Financing Process
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- Young women find financing process confusing
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- Figure 43: Attitudes toward loans and lending – CHAID – Tree output, March 2017
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- Figure 44: Attitudes toward loans and lending – CHAID – Table output, March 2017
TURF Analysis
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- Methodology
- Interest rates are the most important feature
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- Figure 45: TURF analysis – Lender benefits, March 2017
Appendix – CHAID Analysis Methodology
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- Methodology
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- Figure 46: Attitudes toward loans and lending – CHAID – Table output, March 2017
Appendix – Data Sources and Abbreviations
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- Data sources
- Sales data
- Fan chart forecast
- Consumer survey data
- Direct marketing creative
- Abbreviations
Appendix – Consumer
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- Have auto loan
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- Figure 47: Have auto loan, by gender, Oct. 26, 2015-Nov. 30, 2016
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- Figure 48: Have auto loan, by generation, Oct. 26, 2015-Nov. 30, 2016
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- Figure 49: Have auto loan, by household income, Oct. 26, 2015-Nov. 30, 2016
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- Figure 50: Have auto loan, by Hispanic origin/race, Oct. 26, 2015-Nov. 30, 2016
- Auto purchase methods
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- Figure 51: How purchased most recently acquired auto, by gender, Oct. 26, 2015-Nov. 30, 2016
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- Figure 52: How purchased most recently acquired auto, by generation, Oct. 26, 2015-Nov. 30, 2016
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- Figure 53: How purchased most recently acquired auto, by household income, Oct. 26, 2015-Nov. 30, 2016
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- Figure 54: How purchased most recently acquired auto, by Hispanic origin/race, Oct. 26, 2015-Nov. 30, 2016
- Length of loan
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- Figure 55: Length of loan for households’ most recently purchased or leased car, pickup truck, sport utility vehicle or van, February 2014-November 2016
Appendix – Market
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- Figure 56: Fan chart forecast for total new light car, new light truck, and used car sales, 2011-21
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