Auto Insights Driving Change

Automotive Insights Driving ChangeCraig Sims, VP Automotive Solutions

Agenda Impact of COVID on the Auto IndustryConsumer Credit TrendsEmployment TrendsWhat does this mean for dealers?Tools and solutions to help you succeedPROPRIETARY 2

Today’s SpeakersCraig Sims, Vice PresidentAutomotive SolutionsCraig Sims currently servesEquifax and its customers asvice president and automotivepractice lead for theautomotive vertical. A 15-yearveteran of the automotiveindustry, Craig brings deepexpertise to building solutionsthat deliver critical insights andinformation to lenders anddealers, including risk analytics,verifications, use of alternativedata, and digital transactionenablement.Insert Shane’s BioPROPRIETARY 3

Sales of New Light Vehicles Were Down 15% in 2020, ButCame in Much Stronger than Expected in April ForecastsSource: AC Cutts & Associates, U.S. Bureau of Economic Analysis, Federal Reserve Bank of St. Louis (FRED), April-2020forecast is average from Wells Fargo, PNC Bank, Bank of the West, Nationwide Insurance, IHS Markit, ALG Inc., and TD Bank. PROPRIETARY 4

Used Vehicle Sales Also Finished 2020 Strong Total used vehiclesales finished the yearabout the way theystarted, but were notable to make up all ofthe lost sales fromMarch and April Retail sales declinedless than private salesSource: AC Cutts & Associates, Cox Automotive.PROPRIETARY 5

Incentives Have Declined Sharply Among HighDemand and Tight InventoriesSource: AC Cutts & Associates, Cox AutomotivePROPRIETARY 6

Average List Prices for Used Light Vehicles Fell withCOVID Lockdown But Rebounded to End on High NoteAfter COVID Lockdownrestrictions eased, pricesgradually rose as inventorieswere reduced. Asinventories became tighterin the latter half of the year,retail prices jumped.Source: AC Cutts & Associates, vAuto/Cox Automotive VMA DatabasePROPRIETARY 7

Used Vehicle Sales Prices Surged in 2020, Pickupsand Luxury Cars Are Leading the WaySource: AC Cutts and Associates, Cox Automotive Used Vehicle IndexPROPRIETARY 8

New Vehicle Pricing Accelerated Upwards in 2020 In 2020, the share of new vehicleslisting prices above 50,000 exceededthe share with prices below 30,000for the first time 24% of nameplates were priced below 30,000 vs 28% priced at 50,000 ormore. Lower gas prices and higher wealtheffects from decreased consumerspending on travel are driving demandfor more expensive vehicles.Source: AC Cutts & Associates, Cox AutomotivePROPRIETARY 9

Auto loan and Lease Originations from EFXAuto loan originations fell 7.0% in2020 and lease originations fell20.8%. Originations fell less thanauto sales, with new vehicle salesfalling 14.4% and sales of usedvehicles falling 8.2%.Low interest rates should prevailin 2021, attracting vehicle buyerswho might otherwise make theirpurchase in cash. Originationsshould outpace sales as a result.Source: AC Cutts & Associates, Equifax Credit TrendsPROPRIETARY 10

Auto origination risk has shifted significantly toward theprime segmentsSource: Equifax: s; Data through January 18, 2021; % of New Accounts.The last 8 weeks of weekly data is subject to revision due to reporting lags by data furnishers.PROPRIETARY 11

Biweekly Income TrendsAverage income declined by 23% since March 2020 Hourly income was a third of salary income before COVID-19. Salaried income declined by 31% from March toNovember whereas hourly income decreased 11%. Those pays impacted by job loss or furloughs could be compensated by the stimulus package in the short term.The Work Number Biweekly Income TrendsHourly vs Salary Income Trends* Biweekly income is estimated by YTD income b/w two periods (months, or weeks).Sources: TWN WeeklyConfidential and Proprietary

The impact of the Pandemic on income has been broad-basedSource: Equifax The Work Number. Data as reported through May, 2020PROPRIETARY 13

Leading to a broad-based spike in Auto Loan accommodations which have nowleveled off across all score bands, with 620 accommodation rates at 7.4% as ofmid-Jan’21Source: Equifax Credit Trends Data through January 18, 2021PROPRIETARY 14

Accommodation rates on Auto Trades have leveled off;subprime accommodations are approx. 3x the Overall MarketSource: Equifax Credit Trends. Data as reported through January 18, 2021PROPRIETARY 15

Observing higher delinquency trends for the PossibleAccommodation trades when rolling off accommodationsWill consumers miss paymentwhen the loans roll offaccommodation programs?Possible Accommodation tradesthat rolled off had higher DLQThe question is how to identifythose accounts in loanaccommodations today that maymiss payments down the road?Sources: Equifax consumer credit database (ACRO)PROPRIETARY 16

Auto loan Delinquency Rates Are Rising, Consistent with SeasonalFluctuation, But Are Lower than in 2019/Early 2020 for the Same TimeFrameSource: AC Cutts & Associates, Equifax Credit Trends, Data through January 11, 2021PROPRIETARY 17

The Affordability of New Vehicles Did Not Change Muchwith the Economic Conditions of the COVID PandemicFalling interest rates and strong incomesupport under the CARES Act havemaintained new auto affordability despitethe economic conditions throughout 2020.The Cox Automotive/Moody’s AnalyticsVehicle Affordability Index reflects howmany weeks of income the medianincome family would need to pay for theaverage priced new auto financed with a72-month term loan and 10% down.Source: AC Cutts & Associates, Cox Automotive/Moody’s Analytics Vehicle Affordability Index .Data through December2020. See details at ity-index.pdfPROPRIETARY 18

Forecast for New and Used Vehicle Sales in 20212022The COVID Pandemic has shiftedconsumer sentiment towards personalvehicle ownership.Home construction is booming, fuelingdemand for light trucks.Supply chain issues will continue to putpressure on new vehicle sales.Subprime share of auto purchases isdiminished in part by rising scores (theCARES Act income support meant thatmany were able to avoid delinquency orpay down debt) as well as tighterunderwriting standards due to recessionlinked credit risk.Source: AC Cutts & Associates, Nationwide Insurance, Wells Fargo Bank, Daniil Manaenkov, National Auto DealersAssociation, Fitch Ratings, ALG, TrueCar, PNC Bank, Bank of the West. Lighter colored lines indicate forecast range.PROPRIETARY 19

What does this mean for dealers?-- 2021 Challenges & SolutionsPROPRIETARY 20

Strategies for Potential Impacts in 2021InventoryChallenges Low New Car Inventory /Stressed Supply Chain CPO/Late model usedfetching premium ’s Impact of Used VehicleSupply Surge 2nd ½ of2021 Necessity to stay currentwith market trends Build target acquisitionlists based on yourdealerships consumersCredit Restrictions As banks analyze theirportfolios there is risk intightening of creditextension Some consumers benefitfrom increased creditscores while some arefalling into “subprime” forthe first time Higher scrutiny duringfunding process for nonprime dealsConsumer Adoptionof Digital Retailing Continued consumerdesire to handle more ofthe process online Strategize offeringsolutions for appraisals &financing to allow foraccurate online paymentsearching Increased desire forvideos & virtual test drivesPROPRIETARY 21

Inventory StrategyLeverage industry experts’ trend data.Stay current!PROPRIETARY 22

Inventory & Lead Strategy –Analyze your traffic’s credit and conversion metricsAnalyze Credit Worthiness of showroom trafficby lead sourceEnsure there isn’t a breakdown in the salesprocess for all credit spectrumsPROPRIETARY 23

Inventory & Lender StrategyHave the right lender partners to profitablyservice the traffic you’re driving.Regularly examine your average front and backend profit by lender.PROPRIETARY 24

Inventory Stocking StrategyApply learnings to identify targetvehicles to stockReview latest data on top volumeand gross vehicles per credit bandTarget ideal vehicles at auction andconsider when appraising45- Data based on analyzation of previous month deliveriesPROPRIETARY 25

Inventory ValuationsReview Vehicle Specific Data PointsCheck open recalls and parts availabilityon trades & auction vehicles34PROPRIETARY 26

PartnershipsEquifax and ProMax deliverReal time, employment dataPROPRIETARY 27

Lender PartnershipsStrengthen Relationships by submitting accurate income.Did you know? * Approx. 27% of applicants overstate income bymore than 15%Approx. 15% of applicants overstate income by50% or moreApprox. 20% of applicants understate income by10% or more*Study completed pre-covid. With income changes from 2020, this isanticipated to be more problematic in 2021.PROPRIETARY 28

Turning Challenges into OpportunitiesCapitalize on in-market opportunities in yourPMA With this strategy in place, you’ll provide abetter experience for any subprime consumers. 3 4 Dealers can select theirradius and credit scoretarget rangeEvery lead receives a letterimmediately; those whorespond receive a follow upLetters mailed dailyLeads are called andappointments set whenused in conjunction withoptional ProMax BDCservicesLeads are exclusive to yourdealershipCapture additional salesbecause Daily names areimmediately available to calleven before they receive theletterAre you missing out on a piece ofthe market?Extend your marketing reach by targetingconsumers that are actively pursuing an autoloan and actually have the intention ofbuying a car today. MarketThief fromProMax is a highly effective way to capturein-market car buyers that are looking topurchase now.A MarketThief lead is someone that just hadtheir credit report pulled by a dealer or lenderfor the purpose of auto financing. With ourdaily, targeted lists we send a letter to theseleads on your dealership’s behalf. You canstep in and help frustrated shoppers whohave been turned down by other dealers.Turn your competitor’s frustrated prospectsinto your happy customers!PROPRIETARY 29

Digital Retailing ExperiencePrepare for Continued Consumer AdoptionResearch Online95% of automotive shoppers start the research phaseonline, primarily starting with 3rd party websites.Days in Market65% of them will purchase in less than 3 weeksBuyers Shopping Experience52% of car shoppers feel anxious oruncomfortable at dealershipsDealership Visits41% of car buyers only visit one dealership95%65%52%41%PROPRIETARY 30

Digital Retailing Experience – Engage with Trade DataEngage online shoppers and source inventory directly. 514 to 2,514PROPRIETARY 31

Digital Retailing Experience – Engage with Credit DataConvert anonymous eyeballs into leads by providing valuable data to theconsumer,while also streamlining the purchasing process.PROPRIETARY 32

Digital Retailing ExperienceProvide consumers with a frictionless transition from digital toshowroomStreamlineconsumers’buying processwith all the dataneeded tostructure theright dealPROPRIETARY 33

Create a Seamless JourneyCustomer Experience is overtaking price and product as the key brand differentiator.Online ShoppingBDC - firstcontact, set theappointmentSalesperson - instore experienceSales & FinanceManagement presentcustomizedpurchase optionsPROPRIETARY 34

Leadership – Now is the time to take action."So what do we do? Anything. Something. So long as we just don’t sit there. If wescrew it up, start over. Try something else. If we wait until we’ve satisfied all theuncertainties, it may be too late." --Lee Iacoccathe best possible way to prepare for tomorrow is to concentrate with all yourintelligence, all your enthusiasm, on doing today's work superbly today. That isthe only possible way you can prepare for the future." --Dale CarnegiePlease STOP Procrastinating!You’re not getting any younger and your goals aren’t getting any closer because you’re standing still.Make a commitment to yourself RIGHT NOW and start doing those things you’ve always wanted to do.At the end of your journey, the last thing you want to be asking yourself is ‘What if’.Tracy Myers.PROPRIETARY 35