of 31
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Full-Spectrum Lending
Non-Prime Auto Financing ConferenceJune 5, 2008
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Syndicated Study
2007 Dealer Financing Satisfaction
Study
Dealer feedback on more than 40
automotive finance providers
Evaluates all aspects of Dealers
experience origination through
termination
Lenders evaluated in 1. Prime
Retail Credit 2. Sub Prime Retail
Credit 3. Retail Leasing 4. Floor
Planning 5. AccountManagement
Power Information Network (PIN)
Actual Franchised Dealer
transaction data captured from
their DMS
10,000 + dealers reporting more
than 5 Million transactions
annually
Includes: New and Used
transactions
Vehicle data
Consumer data
Trade in data
Finance contract data
Credit score
Information Sources
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FICO Scores in J.D Power and Associate Categories
Categories
1. Prime: > 680
2. Near Prime: 625 to 6793. Sub Prime: < 624
FICOis a registered trademark of Fair Isaac Corporation
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Background
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Drivers of a Full-Spectrum Business Model
* Projection based on JD Power forecasted data
Total U.S. New Vehicle Sales*
2005
18
16
14
12
10
VehicleSalesinMillions
17M
Year of Vehicle Sale
2006 2007
16.5M16.1M
2003 2004
16.9M16.6M
2002
16.8M
2001
17.2M
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What is Full Spectrum Lending?
Prime
Subprime
Merger/Acquisition
OrganicGrowth
UPSTREAM
DOWNSTREAM
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Down
Stream(Prime to SubPrime)
Full SpectrumLending
Up-Stream
(Sub Primeto
Prime )
MidStream
There is More !
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Cumulative Report: Q1 2007-2008
0%
5%
10%
15%
0 520 540 560 580 600 620 640 660 680 700 720 740 760 780 800+
Non Captives Upstream Downstream Midstream
Full Spectrum Provider Business Mix : by FICOScore
FICOis a registered trademark of Fair Isaac Corporation Source: J.D. Power and Associates PIN Navigator data
Sub Prime Near Prime Prime
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What is the current statusof full-spectrum lending?
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2 Million unit sales decline since 2005
* Projection based on JD Power forecasted data
Total U.S. New Vehicle Sales*
2008
14.9M
2005
18
16
14
12
10
VehicleSale
sinMillions
17M
Year of Vehicle Sale
2006 2007
16.5M16.1M
2003 2004
16.9M
16.6M
2002
16.8M
2001
17.2M
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Subprime"2007 Word of the year American Dialect Society
What a year for Subprime
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Upstream(Sub-Prime to Prime)
Challenges for UPSTREAM Lenders
Liquidity
Price
Risk
Processes
Relationship
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Credit
Personnel
24%
Finance
Provider
Offering
30%
Termination
Policy/Service
22%Application/
Approval
Process24%
Dealers want more than just Offering in PrimeRetail Credit
Prime Retail Credit
2007 Dealer Financing Satisfaction Study - weights
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800 900 1000
Credit Unions
Independents
Banks
Captives
Captive Advantage
Offering 30% Credit Personnel 24%
Application/Approval Process 24% Termination Policy/Service 22%
Prime Retail Credit Index Score by Segment
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Downstream(Prime to Sub-Prime)
Challenges for DOWNSTREAM Lenders
Portfolio
Price
Risk
Processes Relationship
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68% of Dealer Satisfaction is People / Process &Policy in Sub Prime Retail Credit
Credit
Personnel
23%
Finance
Provider
Offering32%
Termination
Policy/Service
20%Application/
Approval
Process24%
Sub-Prime Retail Credit
2007 Dealer Financing Satisfaction Study - weights
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500 600 700 800 900 1000
Termination
Policy/Service
Application/Approval
Process
Credit Personnel
Offering
Overall SatisfactionDownstream
Mid-Stream
Upstream
Mid Stream Lenders are the Bestin Sub-Prime Retail Credit Satisfaction
Source: J.D. Power and Associates 2007 DFS Study
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Satisfying Dealers Pays Off
RETAIL CREDIT: FUTURE BUSINESS WITH PROVIDER
Very
Dissastisfied
Somewhat
Dissastisfied
Neutral Somewhat
Satisfied
Very Satisfied
Increase
FutureBusine
ss
Mean
IndexValue
Source: J.D. Power and Associates 2006 Dealer Financing Satisfaction StudySM
Overall Satisfaction Rating
Low
High
Low
High
Overall
Satisfac
tion
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Dealer-Lender Dynamic
Dealer Lender
Move the Metal
Sub Prime CustomerBase Growing
Losing Customers?
Grow / Profitability vs. Risk
How much Sub primebusiness do I want?
How deep can/should I buy?
MarketConditions
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Q1: 2007 vs. 2008
0%
5%
10%
15%
0 520 540 560 580 600 620 640 660 680 700 720 740 760 780 800+
Non Captives 2007 Non Captives 2008
Downstream 2007 Downstream 2008
Downstream Provider Mix by FICO Score
FICOis a registered trademark of Fair Isaac Corporation Source: J.D. Power and Associates PIN Navigator data
Sub Prime Near Prime Prime
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Q1: 2007 vs. 2008
0%
5%
10%
15%
0 520 540 560 580 600 620 640 660 680 700 720 740 760 780 800+
Non Captives 2007 Non Captives 2008
Upstream 2007 Upstream 2008
Upstream Provider Mix by FICO Score
FICOis a registered trademark of Fair Isaac Corporation Source: J.D. Power and Associates PIN Navigator data
Sub Prime Near Prime Prime
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Q1: 2007 vs. 2008
0%
5%
10%
15%
0 520 540 560 580 600 620 640 660 680 700 720 740 760 780 800+
Non Captives 2007 Non Captives 2008
Midstream 2007 Midstream 2008
FICOis a registered trademark of Fair Isaac Corporation
Midstream Provider Mix by FICO Score
Source: J.D. Power and Associates PIN Navigator data
Sub Prime Near Prime Prime
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RiskGrowthProfitability
Where is Full Spectrum Lending Headed?
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Where is Full Spectrum Lending Headed?
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Where is Full Spectrum Lending Headed?
General RetrenchingEvaluate Current Business Model (ERM?)
Re Focus on Core Business
Reward > Risk
Short Term
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Where is Full Spectrum Lending Headed?
Upstream Lenders
Opportunity will be in own back yard
Will Concentrate on Profitability rather than Growth
Midstream Lenders
Opportunity will be on higher end Sub Prime
Will see core business pushed to opposite sides
Downstream Lenders Best Opportunity for Full Spectrum Growth
Will Focus on Prime
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Questions:
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Lower Rates are becoming more available
8.0%9.3%
10.0% 9.5%8.8%
0%
2%
4%
6%
8%
10%
12%
2004 2005 2006 2007 2008
New and Used Vehicle APR