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The Current State of the Non-Prime Vehicle Finance Industry

Blog: Enterprise Decision Management Blog

2018 non-prime auto financing survey

For the past 22 years, the National Automotive Finance (NAF) Association has produced a report for the non-prime auto financing market which serves as a key source of benchmarking for those who participate in or support non-prime automotive financing. This year, FICO was pleased to coordinate the survey, market data, and generate the final analysis and report.

The study collected survey data from 40 different non-prime financing sources that represent about $35 billion in portfolio value on topics like financial performance, competitive landscape, and investment priorities.  The data from the survey was then complemented with data from TransUnion and IHS Markit to show transactional loan data on how the larger market is performing. FICO looked at things like the number of non-prime loans completed, average FICO Auto Score, average amount financed, delinquency rate, and other performance metrics.  We also incorporated vehicle value data from Black Book and alternative data from FactorTrust into the report.

The final report showcases the status of the non-prime market in the U.S. (and a bit of Canada).

Top Seven Insights from the Research

NAF Annual Meeting

I recently presented this research at the NAF Annual Meeting along with Aaron Dalton, SVP, Prestige Financial, and NAF Board Member.  We received great feedback from attendees, and these findings raised some interesting reactions.  Below are a couple of observations based on questions from attendees and speaking with folks at the conference.

Companies who use advanced analytics and data to stay customer-focused and take a more segmented approach to decision-making will be best positioned for long-term stability and profit. There is an interesting paradox however, that larger companies tend to have more advanced technology, and yet smaller “boutique” financing firms are currently showing better returns.  Why is this?  One possibility is that the smaller firms stay “closer to the customer” and or have deep familiarity of their local market and exercise close management of their teams. It will be interesting to watch the market evolve with new technology.

It has been an invaluable and insightful experience working through the data.  Thank you to NAF, AFSA, TransUnion/FactorTrust, IHS Markit, and Black Book for contributing to the report this year. If you’re interested in learning more, the full report will soon be available for purchase from NAF:

The post The Current State of the Non-Prime Vehicle Finance Industry appeared first on FICO.

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