FEATURINGTHE2017 NAAA - Niada

 
FEATURINGTHE2017 NAAA - Niada
2 0 18   A PUBLICATION OF THE NATIONAL INDEPENDENT
         AUTOMOBILE DE ALERS ASSOCIATION

            F E A T U R I N G T H E 2 0 17 N A A A
                     YEAR IN REVIEW
FEATURINGTHE2017 NAAA - Niada
FEATURINGTHE2017 NAAA - Niada
FEATURINGTHE2017 NAAA - Niada
4   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
FEATURINGTHE2017 NAAA - Niada
2 0 18                               USED CAR INDUSTRY REPORT
  TABLE OF CONTENTS
  SECTION 01 - NIADA MEMBERSHIP DATA ...................................................................6                         SECTION 10 - SHOULD YOU CONSIDER
  SECTION 02 - NIADA Q2 BUSINESS CONFIDENCE SURVEY......................................12                                        ALTERNATIVE LOAN BORROWERS?...........................................................................44
  SECTION 03 - BUY HERE-PAY HERE...........................................................................14                     SECTION 11 - CONSUMER EXPERIENCE....................................................................48
  SECTION 04 - NADA USED CAR SALES BY MONTH BY CHANNEL..............................22                                            SECTION 12 - USED CAR MARKET VEHICLE HISTORY TRENDS.................................50
  SECTION 05 - AUTO BUYING PATTERNS BY BODY STYLES.......................................24                                       SECTION 13 - IMPOUND STORAGE FEES, A BILLION-DOLLAR PROBLEM...............54
  SECTION 06 - TESLA: COMING IN HOT!.....................................................................28                       SECTION 14 - BLOCKCHAIN: TRANSPARENCY, INTEGRITY, RELIABILITY................58
  SECTION 07 - 2018 CAR BUYER JOURNEY STUDY.....................................................32                                SECTION 15 - MARKETING EFFECTIVENESS..............................................................62
  SECTION 08 - AUTOMOTIVE FINANCE MARKET.........................................................36                               SECTION 16 - RETENTION VALUES ANALYSIS............................................................66
  SECTION 09 - SUBPRIME CREDIT & LENDING TRENDS ...........................................40                                     SECTION 17 - 2017 NAAA YEAR IN REVIEW...............................................................71

INDUSTRY CONFIDENCE REMAINS STRONG AMID GROWING RETAIL                                                                                                                                     DEALERS MEASURE OPTIMISM AGAINST
                                                                                                                                                                                           INCREASING WHOLESALE COSTS AND A 10-
SALES, LOW UNEMPLOYMENT AND COMPETITIVE INTEREST RATES                                                                                                                                     YEAR HIGH IN CONSUMER WAGE GROWTH

                        By Steve Jordan,                                             like NADA, NAAA and NABD are vital to our                                               CARFAX summarizes vehicle history trends in
                                                                                     advocacy efforts.
                        NIADA CEO                                                       We are proud to work include the 2017 NAAA
                                                                                                                                                                          Section 12, as well as providing a second year of
                                                                                                                                                                          data on vehicle recalls by state.
                    The 2018 Used Car Industry
                                                                                     Year in Review within this report (Section 17),                                         The chart on page 52 shows the number of
                 Report picks up the industry
                                                                                     including a summary of the annual Manheim                                            recalled vehicles has dropped in nearly every
                 narrative as it rebounds from
                                                                                     Market Report and Outlook for the rest of 2018.                                      state, illustrating how successful CARFAX and
                 the fluctuations in automotive
                                                                                        In Section 3, NABD provides in-depth analysis                                     NIADA have been in moving toward the goal of a
                 lending and underwriting over
                                                                                     of the Buy Here-Pay Here segment for the year                                        100 percent completion rate for open recalls.
the past couple of years.
                                                                                     past, along with forecasts for what BHPH dealers                                        Dealers can alleviate consumer concerns
   Prime and near-prime lenders are
                                                                                     can expect for the rest of 2018 and beyond.                                          about recalls by repairing and/or disclosing open
normalizing their marketplace positions and
                                                                                        The Used Car Industry Report is also filled                                       recalls during the purchase process, boosting
competing for customers with stronger incomes,
                                                                                     with invaluable data from several of NIADA’s                                         trust and making your dealership stand out from
and by extension are placing tighter restrictions
                                                                                     industry vendor partners and leading nationally                                      the competition.
on auto finance contracts for non-prime and
                                                                                     recognized automotive brands. These companies                                           We’re pleased to offer a new section of data
subprime customers.
                                                                                     spend millions of dollars on research of the used                                    about impound storage fees and their costly
   Auto lenders lending in their normal channels
                                                                                     vehicle industry, including dealer and consumer                                      effect to the bottom line of dealers nationwide,
is good for the industry, especially Buy Here-Pay
                                                                                     studies and while papers, contributing to the                                        presented in Section 13 by another NIADA
Here dealers and operators.
                                                                                     overall perspective and confidence we all have in                                    industry partner, GoldStar by Spireon.
   The report opens with detailed statistics and
                                                                                     the automotive industry.                                                                Another new section providing data on
demographics from NIADA’s members, a great
                                                                                        In Section 4, J.D. Power/NADA Used Car                                            blockchains and the effects alternative
tool to see how your dealership compares to
                                                                                     Guide provides a breakdown of used car sales by                                      currencies such as bitcoin will have on the used
other dealer members nationwide.
                                                                                     channel by month. In Section 5 industry partner                                      auto industry is provided by another new NIADA
   Special thanks to those who take the time to
                                                                                     CarGurus goes a step further and details auto                                        industry partner, Acertus. See Section 14 for that
complete our membership surveys. Your time
                                                                                     buying patterns by body style. And in Section 6,                                     fascinating narrative.
and effort is extremely important, ensuring
                                                                                     Dominion gives us details on Tesla vehicles and                                         Dealer marketing is again included in this
statistical relevance and creating a benchmark
                                                                                     other electric vehicle sales.                                                        year’s report, but with a fresh perspective
for NIADA membership.
                                                                                        Autotrader, Dealer.com and KBB teamed up                                          presented in Section 15 by NIADA industry
   The NIADA Business Confidence Survey
                                                                                     once again to present the 2018 Car Buyer Journey                                     partner DealerCenter. It details website traffic
(Section 2) continues to add a unique, real-time
                                                                                     Study in Section 7, an important look at the                                         and lead generation, where dealers are posting
dealer perspective on the state of the industry
                                                                                     customers are who purchase used vehicles and                                         inventory online, Google search results, mobile
and its confidence regarding key business
                                                                                     how they shop.                                                                       search and much more.
indicators.
                                                                                        NIADA has partnered again with Experian and                                          And as always, industry partner Black Book
   The quarterly results, compiled with the
                                                                                     Equifax to provide a detailed analysis of the used                                   provides its yearly retention values analysis
assistance of industry partner Equifax, are a
                                                                                     automotive finance and subprime markets and                                          (Section 16).
great educational tool to pass on to legislators,
                                                                                     credit trends (Sections 8 and 9).                                                       I’d like to thank all of our industry partners
regulators, media and others who seek better
                                                                                        In Section 10, one of our newest industry                                         who help us make NIADA’s annual Used Car
insight into the industry on a timely, consistent
                                                                                     partners, TransUnion, details its insights on                                        Industry Report a must-have in understanding
basis.
                                                                                     consumers and the alternative credit market.                                         our industry.
   As NIADA continues to educate national, state
                                                                                     More consumer data is presented by RouteOne                                             And I want to thank you, our dealer members
and local officials about the used auto industry,
                                                                                     in Section 11, taking a deep dive into consumer                                      and our allied industry partners for your ongoing
our strong alliances with industry associations
                                                                                     digital workflow experiences.                                                        feedback and support of our shared goals.
       A Publication Of The National Independent Automobile Dealers Association. Used Car Dealer (ISSN# 0279425X)is published monthly with one additional special issue, Used Car Industry Report, that is published in October by the National
       Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone (817) 640-3838. Annual subscription rates for NIADA members: $8. Non-member subscription rates are $150. Periodicals postage
       paid at Dallas, TX. POSTMASTER: Send address changes to Used Car Dealer, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the
       views of Used Car Dealer or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as member of NIADA, does not constitute an endorsement of the products or services featured.
       Copyright© 2018 by NIADA Services, Inc. All rights reserved.

 2018 N I A DA U S E D C A R I N D U S T RY R E P O R T                                                                                                                                                                       W W W. N I A DA .CO M         5
FEATURINGTHE2017 NAAA - Niada
NIADA MEMBERSHIP DATA
Section 01
  One of the best ways to gauge the success of your dealership                                                                                                     • More than 53% of our membership sell vehicles in the
and its operations is to compare your dealer demographics and                                                                                                        6-10 year old range.
your dealer data to those of other NIADA members around the                                                                                                        • More than 60% of our dealer members sell vehicles in the
country. Each year NIADA surveys its members on a quarterly                                                                                                          retail price points of $5,000 to $10,000.
basis on a variety of topics covering demographic and business                                                                                                     • 71% of our dealer members have annual sales volumes of
data.                                                                                                                                                                $2.5 million or less.
  In addition, we were able to pull six key data points of our                                                                                                     • 72% of our dealer members sell 400 units or less per year.
dealer members from our InfoGroup data on page 7 of this                                                                                                           • 96% of our dealer members are single location dealers.
section. The six charts on page 7 are derived from over 10,700                                                                                                     • 64% of our dealer members have 1-4 employees.
confirmed dealer member records within our InfoGroup data,                                                                                                         • NIADA Dealer Members overwhelmingly rely on online
providing a 100% confidence level in the validity of the data on                                                                                                     advertising as their main advertising avenue. Also, dealer
this particular page of the report.                                                                                                                                  members reported an 18% increase in mobile advertising.

 Age of Vehicles Sold                                                                                                                                              What is the Nature of Your Business?
 (PERCENTAGE OF RESPONDENTS)                        SOURCE: NIADA MEMBER SURVEY
                                                                                                                           •     2016
                                                                                                                                                 •   2017          (PERCENTAGE OF RESPONDENTS)                         SOURCE: NIADA MEMBER SURVEY
                                                                                                                                                                                                                                                                                              •       2016
                                                                                                                                                                                                                                                                                                               •      2017

 55                                                                                                                                                                                                                                                                                  NOTE: NUMBERS WON’T
                                                                                                                                                                   70                                                                                                            NECESSARILY ADD UP TO 100%
 50                                                                                                                                                                                                                                                                            BECAUSE DEALERS CAN CHOOSE
                                                                                                                                                                                                                                                                                  MORE THAN ONE CATEGORY.

 45                                                                                                                                                                60

 40
                                                                                                                                                                   50
 35

 30                                                                                                                                                                40

 25
                                                                                                                                                                   30
 20

 15                                                                                                                                                                20

 10
                                                                                                                                                                                                                                                  6.2%
                        4.3%

                                    4.2%

                                                                                                                                                                   10

                                                                                                                                                                                                                                                                     3.9%

                                                                                                                                                                                                                                                                                                                          4.5%
    5
                                                                                                                                                                                                                                                           3.4%
                                                                                                                                                                                                            45.0%
                                                                                                                                                                                           68.9%

                                                                                                                                                                                                                                                                                              35.8%
                                                                                                                                                                                                                                          25.6%

                                                                                                                                                                                                                                                                                                       23.0%

                                                                                                                                                                                                                                                                                                                  14.6%
                                                                                                                                                                             91.4%
                                                                                                53.2%
                                                     29.1%

                                                                                                                                                                                                                                                                                 2.1%
                                                                                57.8%

                                                                                                                                      12.1%

                                                                                                                                                                                                                            49%
                                                                                                                                                                                                   38%
                                                                                                                        8.8%
                                                                  30.5

    0                                                                                                                                                                  0
                                                                                                                                                                                  Retail

                                                                                                                                                                                                                                                                                                                      Parts
                                                                                                                                                                                                     BHPH

                                                                                                                                                                                                                              Wholesale

                                                                                                                                                                                                                                                      Rental

                                                                                                                                                                                                                                                                           Leasing

                                                                                                                                                                                                                                                                                                Service
                                                                                                                                                                                                                                                                                                  Dept.

                                                                                                                                                                                                                                                                                                                      Dept.
                                1-2                        3-5                          6-10                                11+
                               YEARS                      YEARS                         YEARS                              YEARS

 Average Vehicles in Inventory                                                                                                                                     Average Retail Price
 (PERCENTAGE OF RESPONDENTS)                        SOURCE: NIADA MEMBER SURVEY
                                                                                                                               •   2016
                                                                                                                                                 •     2017        (PERCENTAGE OF RESPONDENTS)                         SOURCE: NIADA MEMBER SURVEY
                                                                                                                                                                                                                                                                                         •   2016
                                                                                                                                                                                                                                                                                                       •       2017

35

                                                                                                                                                                   60
30
                                                                                                                                                                   55

                                                                                                                                                                   50
25
                                                                                                                                                                   45

                                                                                                                                                                   40
20
                                                                                                                                                                   35

                                                                                                                                                                   30
15
                                                                                                                                                                   25

10                                                                                                                                                                 20

                                                                                                                                                                   15

 5                                                                                                                                                                 10
                                                                                                                                                     2.9%

                                                                                                                                                                                                                    60.4%
                                                                                                                                                                                                    54.5%

                                                                                                                                                                                                                                                                   33.6%
                                                                                                                                                                                           14.5%

                                                                                                                                                                                                                                                  13.3%

                                                                                                                                                                                                                                                                                     10.7%
                                           1.2%

                                                                                        15.7%
                                                  13.5%
        16.4%

                                                                                                                                                                   5
                                                                                                                                                                                                                                                                                                      8.4%
                                                                                                                                                                                                                                           2.8%
                12.2%

                         16.7%

                                                                                                                                                                           0.7%
                                 12.7%

                                                                                                        19.5%

                                                                                                                                         10.7%

                                                                                                                                                                                                                                                                                                                  1.1%
                                                                                                                11.9%
                                                                     15.7%

                                                                                1.1%

                                                                                                                                                            7.6%
                                                                                                                               7.2%
                                                             35%

 0                                                                                                                                                                 0
           1-10            11-20            21-30             31-50                 51-75                76-100                101-200                 200+                 $0-5,000               $5,001-10,000                     $10,000-15,000               $15,001-20,000                        $20,001+
                                                                         vehicles

6       2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
FEATURINGTHE2017 NAAA - Niada
NIADA INFO GROUP DATA                                                                                                                      Section 01

Annual Sales Volume                                                                                                                          Annual Retail Sales by Unit
SOURCE: INFOGROUP
                                                                                              •    2016
                                                                                                                 •   2017                    SOURCE: INFOGROUP
                                                                                                                                                                                                                                                                                                                            •   2017

 35                                                                                                                                           30

 30
                                                                                                                                              25

 25
                                                                                                                                              20

 20

                                                                                                                                              15
 15

                                                                                                                                              10
 10

                                                                                                                                              5

                                                                                                                                                                                                                                                                                                        3.3%
                                                                                                                                                                                                                                                                                     3.5%
 5

                                                                                                                                                                                 26.4%
                                                                                                                                                           28.7%
                          34.8%
                 36.0%
        35.0%

                                    35.0%

                                               13.6%

                                                          13.0%

                                                                                                                                                                                                         17.7%

                                                                                                                                                                                                                                                                                                                                6.2%
                                                                                         8.0%

                                                                                                                     8.0%

                                                                                                                                                                                                                               7.1%

                                                                                                                                                                                                                                                            7.1%
                                                                                                         8.7%
                                                                               7.9%

 0                                                                                                                                            0
        less than $1         $1-2.5              $2.5-5                             $5-10                more than                                    0 - 100                  101 - 250           251 - 400           401 - 550                    551 - 700                  701 - 850        851 - 1000                   1000+
           million           million             million                            million              $10 million

Number of Years in Business                                                                                                                  Multiple Locations                                                            Number of Employees
SOURCE: INFOGROUP
                                                                                              •   2016
                                                                                                           •     2017                        SOURCE: INFOGROUP                                                             SOURCE: INFOGROUP
                                                                                                                                                                                                                                                                                                              •      2016
                                                                                                                                                                                                                                                                                                                                •      2017

                                                                                                                                                                           •   2016
                                                                                                                                                                                          •      2017

 30                                                                                                                                          90                                                                            70

                                                                                                                                             80
                                                                                                                                                                                                                           60
 25
                                                                                                                                             70
                                                                                                                                                                                                                           50
 20                                                                                                                                          60

                                                                                                                                             50                                                                            40
 15
                                                                                                                                             40                                                                            30

 10                                                                                                                                          30
                                                                                                                                                                                                                           20
                                                                                                                                             20

                                                                                                                                                                                                                                                                                              10.0%

                                                                                                                                                                                                                                                                                                             10.0%

                                                                                                                                                                                                                                                                                                                                       8.0%
                                                                                                                                                                                                                                                                                                                            9.0%
 5
                                                                                                                                                                                                                           10
                                                                                                                                                                                          4.0%

                                                                                                                                             10
                                                                                                                                                                                4.3%
                                                                                                                                                                   96.0%
                                    20.0%

                                                                                                                                                                                                                                      62.3%

                                                                                                                                                                                                                                                                                    18.0%
                                                               16.0%

                                                                                                                                                                                                                                                    64.0%
                                                                                          10.0%

                                                                                                         28.4%
       23.4%

                                                                                                                     27.0%
                         20.8%

                                                                                                                                                   95.7%
                27.0%

                                               16.4%

                                                                                11.0%

                                                                                                                                                                                                                                                                      18.7%

 0                                                                                                                                           0                                                                             0

         1-5 years        6-10 years           11-15 years                      16-20 years               21+ years                                  single                      multiple                                                     1-4                             5-9                10-19                          20+
                                                                                                                                                    location                    locations

Advertising Spend Annual                                                                                                                                   Dealership Size by Square Footage
SOURCE: INFOGROUP
                                                                                                           •     2016
                                                                                                                              •     2017                   SOURCE: INFOGROUP
                                                                                                                                                                                                                                                                                                 •       2016
                                                                                                                                                                                                                                                                                                                      •      2017

35                                                                                                                                                         65
                                                                                                                                                           60
30                                                                                                                                                         55
                                                                                                                                                           50
25
                                                                                                                                                           45
                                                                                                                                                           40
20
                                                                                                                                                           35
                                                                                                                                                           30
15
                                                                                                                                                           25
                                                                                                                                                           20
10
                                                                                                                                                           15
                                                                                                                                                                                                                                                                               7.0%
                                                                                                                                                                                                                                                               7.5%

5                                                                                                                                                          10
                                                                                                                                                                                                                                                                                                                     4.0%
                                                                                                                                                                                                                                                                                                      4.2%
                                       28.0%
      33.3%

                35.0%

                                                                                                                                                                                                                                  23.0%
                                                                                                                                                                                                 66.0%
                                                                                                                                                                                  65.4%
                            28.0%

                                                       22.4%

                                                                                                                                                                                                                   22.9%

                                                                                                                                                           5
                                                                       22.0%

                                                                                                                                      8.0%
                                                                                                                             8.4%
                                                                                                     7.0%
                                                                                          7.9%

0                                                                                                                                                          0
      less than $10K             $10-20k                  $21-50k                             $51-100k                 more than $100k                                           less than 2,500                 2,500-10k square                      10k-40k square feet                      more than 40k
                                                                                                                                                                                   square feet                         feet                                                                      square feet

                                                                                                                                                                                                                                                                                                      W W W. N I A DA .CO M                   7
FEATURINGTHE2017 NAAA - Niada
Section 01                                                                                   NIADA MEMBERSHIP FINANCING
    How do you Finance/Floorplan your Inventory?                                                                                                                                What Finance Options do you Supply to your Customers?
    (PERCENTAGE OF RESPONDENTS)
                                                                                                                                            •   2016
                                                                                                                                                             •     2017         (PERCENTAGE OF RESPONDENTS)
                                                                                                                                                                                                                                                                                              •   2016
                                                                                                                                                                                                                                                                                                            •         2017

                                                                                                                          NOTE: NUMBERS WON’T
                                                                                                                      NECESSARILY ADD UP TO 100%
                                                                                                                    BECAUSE DEALERS CAN CHOOSE                                                                                                                                     NOTE: NUMBERS WON’T
    65                                                                                                                 MORE THAN ONE CATEGORY.                                                                                                                                 NECESSARILY ADD UP TO 100%
                                                                                                                                                                                                                                                                             BECAUSE DEALERS CAN CHOOSE
    60                                                                                                                                                                                                                                                                          MORE THAN ONE CATEGORY.

    55                                                                                                                                                                          55

    50                                                                                                                                                                          50

    45                                                                                                                                                                          45

    40                                                                                                                                                                          40

    35                                                                                                                                                                          35

    30                                                                                                                                                                          30

    25                                                                                                                                                                          25

    20                                                                                                                                                                          20

    15                                                                                                                                                                          15

    10                                                                                                                                                                          10

                                                                                                                                                                                5

                                                                                                                                                                                                     49.6%
                            36.4%

    5

                                                                                                                                                                                        46.8%

                                                                                                                                                                                                                                                                             45.5%
                                                                                                                                                     62.5%

                                                                                                                                                                                                                                         48.2%

                                                                                                                                                                                                                                                             55.5%

                                                                                                                                                                                                                                                                                                  32.6%

                                                                                                                                                                                                                                                                                                                  50.2%
                                                    27.5%

                                                                                                                                    61.4%
                                                                                       18.5%

                                                                                                    27.5%

                                                                                                                                                                                                                         51.3%
    0                                                                                                                                                                           0
                                    banks                                        auction floorplanning                                      cash                                                    BHPH             finance company                                 banks                        credit union

    Advertising Media Used                                                                                                                                                      Average Down Payment
    (PERCENTAGE OF RESPONDENTS)
                                                                                                                                            •   2016
                                                                                                                                                             •      2017        (PERCENTAGE OF RESPONDENTS)
                                                                                                                                                                                                                                                                                          •    2016
                                                                                                                                                                                                                                                                                                           •        2017

                                                                                                                          NOTE: NUMBERS WON’T
                                                                                                                      NECESSARILY ADD UP TO 100%
    80                                                                                                              BECAUSE DEALERS CAN CHOOSE
                                                                                                                       MORE THAN ONE CATEGORY.                                  50

    70                                                                                                                                                                          45

                                                                                                                                                                                40
    60
                                                                                                                                                                                35
    50
                                                                                                                                                                                30

    40                                                                                                                                                                          25

                                                                                                                                                                                20
    30

                                                                                                                                                                                15
    20
                                                                                                                                                                                10
    10
                                                                                                                                                                                                                  3.0%

                                                                                                                                                                                    5
                                                                                4.1%

                                                                                                                                                                                                                                 25.6%
                                                                                                                            4.1%

                                                                                                                                                                                                                                                                              1.0%
                                                                                                          80.0%

                                                                                                                                                                 23.5%

                                                                                                                                                                                            49.4%

                                                                                                                                                                                                                                                                                       8.4%
                                                                                                                                                                                                                                                  34.4%
                                                                                                                                                                                                         45.5%
                    14.0%

                                                            14.3%

                                                                                                76.6%

                                                                                                                                                     19.8%
                             21.0%

                                            21.3%

                                                                                       11.8%

                                                                                                                                                                                                                                                          14.8%
                                                                    21.1%

                                                                                                                                                                                                                                                                                                          12.2%
             7.5%

                                                                                                                                            1.3%
                                                                                                                  9.1%

                                                                                                                                                                         1.2%

                                                                                                                                                                                                                                                                                                                          5.7%
     0                                                                                                                                                                              0
                TV

                                    newspaper

                                                                radio

                                                                                 specialty
                                                                                     pubs

                                                                                                    online

                                                                                                                      magazine

                                                                                                                                                mobile

                                                                                                                                                                     other

                                                                                                                                                                                            up to $1,000         $1,001-$1,500                   $1,501-$2,000           $2,001-$2,500                      $2,501+

    Average Term of Contract                                                                                                                                                    If you are a BHPH Dealer,                                2016                                                 2017
    (PERCENTAGE OF RESPONDENTS)
                                                                                                                                            •   2016
                                                                                                                                                             •     2017
                                                                                                                                                                                do you have a Related
                                                                                                                                                                                Finance Company?
    35
                                                                                                                                                                                (PERCENTAGE OF                                     YES
                                                                                                                                                                                                                                  30.9%                                               YES
                                                                                                                                                                                RESPONDENTS)                                                                                         19.4%
    30                                                                                                                                                                                                                                             NO
                                                                                                                                                                                                                                                  69.1%                                                NO
                                                                                                                                                                                                                                                                                                      80.6%

    25

    20

    15                                                                                                                                                                          Separate F&I Department                                  2016                                                 2017
                                                                                                                                                                                (PERCENTAGE OF
                                                                                                                                                                                RESPONDENTS)
    10                                                                                                                                                                                                                             YES
                                                                                                                                                                                                                                  20.1%                                               YES
                                                                                                                                                                                                                                                                                     20.2%

        5
                            3.0%

                                                                                                                                                                                                                                                   NO
                                                                                                                                                                                                                                                  79.9%
                                                                                                                   20.4%
                                                                                                  22.6%

                                                                                                                                                                     32.2%
                                                     14.9%

                                                                        14.8%

                                                                                                                                                                                                                                                                                                       NO
                                                                                                                                   27.3%
                                                                                        26.1%

                                                                                                                                                         31.3%
                7.3%

                                                                                                                                                                                                                                                                                                      79.8%
        0
              0-12 months                       13-24 months                           25-36 months               37-48 months                           49+ months

8       2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
FEATURINGTHE2017 NAAA - Niada
W W W. N I A DA .CO M   9
FEATURINGTHE2017 NAAA - Niada
Section 01                                                                                                                          NIADA MEMBERSHIP AUCTIONS, SERVICE, AFTERMARKET

 Where do you Buy your Vehicles?                                                                                                                                                 How do you Wholesale your Vehicles?                                                                                  How Often Does your Dealership Attend
 (PERCENTAGE OF RESPONDENTS)                                                                                                                                                     (PERCENTAGE OF RESPONDENTS)
                                                                                                                                                                                                                                                                                                      Auctions Per Month? (PERCENTAGE OF RESPONDENTS)
 •    2016
                •       2017
                                                                                             NOTE: NUMBERS WON’T
                                                                                                                                                                                 •        2016
                                                                                                                                                                                                      •   2017
                                                                                                                                                                                                                                   NOTE: NUMBERS WON’T                                                •    2016
                                                                                                                                                                                                                                                                                                                        •      2017
                                                                                         NECESSARILY ADD UP TO 100%                                                                                                            NECESSARILY ADD UP TO 100%
 90                                                                                    BECAUSE DEALERS CAN CHOOSE
                                                                                                                                                                                   90                                        BECAUSE DEALERS CAN CHOOSE                                                   45
                                                                                          MORE THAN ONE CATEGORY.                                                                                                               MORE THAN ONE CATEGORY.

 80                                                                                                                                                                                80                                                                                                                     40

 70                                                                                                                                                                                70                                                                                                                     35

 60                                                                                                                                                                                60                                                                                                                     30

 50                                                                                                                                                                                50                                                                                                                     25

 40                                                                                                                                                                                40                                                                                                                     20

 30                                                                                                                                                                                30                                                                                                                     15

 20                                                                                                                                                                                20                                                                                                                     10

 10                                                                                                                                                                                10                                                                                                                     5

                                                                                                                                                                                                                                                                                                                                                         46.6%
                                                                                                                                                                                                                                             46.8%

                                                                                                                                                                                                                                                                                                                                           41.8%
                                                                            43.5%

                                                                                                                                                                                                                                                                                                                                                                                23.0%
                                                                                                                                                                                                                                                                                                                                                                    18.6%

                                                                                                                                                                                                                                                                                                                                                                                                                 28.4%
                                   83.8%

                                                                                                                                   37.0%

                                                                                                                                                                                                                                                                                                                           2.0%
                                                                                                                                                                                                                                                                                                                   11.9%
                                                                                                       31.9%

                                                                                                                     22.9%

                                                                                                                                                                                                                                                                                                                                                                                                 27.7%
                                                                                                                                                                                                                                                                          15.9%
                                                                                       30.4%

                                                                                                                                                                                                      88.0%
                    97.4%

                                                                                                                                                                                                                     81.1%
                                                    47.1%

                                                                                                                                                                                                                             43.7%

                                                                                                                                                                                                                                                             12.7%
     0                                                                                                                                                                                    0                                                                                                               0

                                                                                                                                                                                                                                                                                                                                                                                                     8 or more times
                                                                                                                                                                                                                                                                                                                                                                        5-7 times
                                                                                                                                                                                                                                                                                                                        none

                                                                                                                                                                                                                                                                                                                                                 1-4 times
                        auctions

                                                                                                                                                                                                          auctions
                                                                                              online

                                                                                                                                                                                                                                                                 online
                                                            other dealers

                                                                                                                         wholesalers

                                                                                                                                                                                                                                 other dealers
                                                                                                                           What do you Spend per Unit                                                                                                                                                     How Many Service Bays do you Operate?
     50
                                                                                                                         Reconditioning your Vehicles?                                                                                           35                                                                                                      (PERCENTAGE OF RESPONDENTS)

     45                                                                                                                                                     (PERCENTAGE OF RESPONDENTS)                                                                                                                                                                                     •        2016
                                                                                                                                                                                                                                                                                                                                                                                                 •          2017

     40                                                                                                                                                                   •      2016
                                                                                                                                                                                                 •    2017
                                                                                                                                                                                                                                                 30

     35                                                                                                                                                                                                                                          25

     30
                                                                                                                                                                                                                                                 20
     25

     20                                                                                                                                                                                                                                          15

     15                                                                                                                                                                                                                                          10
     10
                                                                                                                                                                                          5.0%

                                                                                                                                                                                                                                                  5
                                                                                                                                                                        3.2%

     5
                                                                                      39.4%
                                                              35.3%

                                                                                                             41.5%

                                                                                                                                                           18.2%
                                           47.5%

                                                                                                                                                                                                                                                                                          32.7%

                                                                                                                                                                                                                                                                                                                                                   22.5%
                                                                                                                                                                                                                                                                                                                27.6%

                                                                                                                                                                                                                                                                                                                                   22.6%
                                                                                                                                                                                                                                                                                                  25.1%
                                                                                                                                                                                                                                                                              35.6%

                                                                                                                                                                                                                                                                                                                                                                     16.7%

                                                                                                                                                                                                                                                                                                                                                                                         17.2%
                                                                                                                                  9.9%

     0                                                                                                                                                                                                                                            0
                                                                                               $501-$1,000

                                                                                                                                           $1,001-$2,000

                                                                                                                                                                                $2,001+
                                                   0-$500

                                                                                                                                                                                                                                                                                      0                   1-2                              3-5                                      6+

          Do you Sell Warranties/                                                                                                             If Yes, How Many Warranties/                                                                       Do you Use GPS Devices?                                                                                         If Yes, What Functions
          Service Contracts?                                                                                                                  Service Contracts do you Sell                                                                  •        2016
                                                                                                                                                                                                                                                                                      •   2017                                                                            are Included?
          •                                          •                                                                                                         Per Month?
                                                                                                                                                                                                                                                                                                                                       64 %

               2016                                                   2017
                                                                                                                                                                                                                                                                                                                                         .8%
                                                                                                                                                                                                                                                                                                                                           .3
                                                                                                                                                  .3%

                                                                                                                                                                                                                                                                                                                           70%
                                                                                                                                                                                                                                                                                                                                        65
                                                                                                                                                .6%
                                                                                                                                           53

                                                                                                                                                                                                                                                                                                                           60%
                                                                                                                         50%
                                                                                                                                                           48

             YES             NO                                                                                                                                                                                                                   YES           NO                                                         50%
            61.8%           38.2%
                                                                   YES                                                   40%                                                                                                                     37.5%         62.5%                       YES
                                                                  56.2%                                                                                                                                                                                                                   46.6%
                                                                                            NO                                                                                                                                                                                                     NO                      40%
                                                                                                                                                                             18 9%

                                                                                           43.8%                         30%                                                                                                                                                                      53.4%
                                                                                                                                                                                                                                                                                                                                                                     .0%
                                                                                                                                                                                                                                                                                                                                                                     .2%
                                                                                                                                                                       12 .5%
                                                                                                                                                                                  .
                                                                                                                                                                               21

                                                                                                                                                                                                                                                                                                                           30%
                                                                                                                                                                                                                                                                                                                                                                  29
                                                                                                                                                                                                                                                                                                                                                                  28
                                                                                                                                                                   4.9 %
                                                                                                                                                                        130%

                                                                                                                         20%
                                                                                                                                                                            .4

                                                                                                                                                                        .7%
                                                                                                                                                                          .

                                                                                                                                                                   7.9 %

                                                                                                                                                                                                                                                                                                                               20%
                                                                                                                                                                       %

                                                                                                                                                                      %
                                                                                                                                                                     10
                                                                                                                                                                    8.8

                                                                                                                                                                                                                                                                                                                                                                                                     %

                                                                                                                         10%
                                                                                                                                                                                                                                                                                                                                                                                                     %
                                                                                                                                                                                                                                                                                                                                                                                                 7.0
                                                                                                                                                                                                                                                                                                                                                                                                 5.7

                                                                                                                                                                                                                                                                                                                               10%
                                                                                                                             0
                                                                                                                                                      1-5           6-10 11-20 21-30                   31+                                                                                                                     0
                                                                                                                                                                                                                                                                                                                                            GPS                    STARTER                       PAYMENT
                                                                                                                                                                                                                                                                                                                                                                  INTERRUPT                      REMINDER

          Do you Sell Aftermarket Products?                                                                                                                          Do you Offer Certified Pre-Owned Vehicles?                                                                                            Do you Have a Rental Car Operation?
          •   2016
                                                                            •       2017
                                                                                                                                                                      •   2016                                               •   2017
                                                                                                                                                                                                                                                                                                          •     2016                                                                •      2017

                                                                                                                                                                                YES                                                                                                                                 YES
                                                                                                                                                                               14.7%                                          YES                                                                                  11.8%                                            YES
            YES
           30.6%                                                                YES                                                                                                                                          15.5%                                                                                                                                 11.2%
                                                                               25.7%
                       NO                                                                                                                                                                      NO                                                                                                                               NO
                      69.4%                                                                                                                                                                   85.3%                                                                                                                            88.2%

                                                                                                     NO                                                                                                                                                NO                                                                                                                                  NO
                                                                                                    74.3%                                                                                                                                             84.5%                                                                                                                               88.8%

10       2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
W W W. N I A DA .CO M   11
NIADA Q2 BUSINESS
CONFIDENCE SURVEY
                                                                                                                                                                        INDUSTRY
                                                                                                                                                                        NEWS

Section 02
   The economic and corresponding retail sales growth expectations of                                                  Second, used vehicle inventory costs remain high – the latest Manheim
independent used vehicle dealers continued to be very conservative in                                               Used Vehicle Value Index rose to 134.9, a 4.3 percent increase from a year
NIADA’s business confidence survey for the second quarter of 2018.                                                  ago and the highest level since last October.
   Economic growth expectations were down 7 percent from the first                                                     That’s also reflected in the Q2 business confidence survey, as 67 percent
quarter survey, with only 39 percent expecting improvement, and retail                                              of respondents said they expect their dealership costs will increase this
sales growth expectations rose slightly to 53 percent. Customer traffic                                             quarter.
expectations took a larger jump, with 49 percent of dealers saying they                                                The escalation of business expenses is also due in part to the significant
anticipate more customers coming into their dealership in the current                                               investment independent dealers must make to compete in the digital
quarter.                                                                                                            showroom. The survey shows dealerships continuing to increase the
   Those results align with the current environment of high consumer                                                digital component of their sales and marketing budgets.
confidence, unemployment at its lowest rate since 2000, wage growth at a                                               On a positive note, U.S. retail sales rose solidly in June as households
10-year high and still historically competitive interest rates.                                                     boosted purchases of automobiles and other goods, cementing
   There are two major challenges to independent dealers taking advantage                                           expectations for robust economic growth.
of those positive trends.                                                                                              The Commerce Department reported retail sales increased 0.5 percent
   First is a retrenchment of auto finance funding, particularly in the                                             in June and data for May was revised to show sales rising 1.3 percent,
subprime and nonprime credit tiers, as noted by the 40 percent of                                                   the largest since September 2017, instead of the previously reported 0.8
respondents to the NIADA survey who indicated auto finance companies                                                percent gain.
were placing tighter restrictions on auto finance contracts.                                                                      BY SCOTT LILJA
   To deal with that and to capitalize on the expected increase in customer                                                       Scott Lilja is NIADA’s senior vice president
traffic, dealers can be more creative with pre-approvals and credit checks.                                                       of member services. He can be reached at
   Equifax’s latest Auto Consumer Credit study showed 52 percent of                                                               scott@niada.com.
prospective purchasers have undergone a credit check but just 15 percent
intend to get pre-approved for their desired vehicle and 32 percent do not                                                        BY JENNIFER REID
plan to seek approval during the shopping process.                                                                                Jennifer Reid is Equifax’s vice president
   Dealers can play a larger role in helping or encouraging pre-approvals,                                                        of Automotive Marketing and Strategy
which can create a less adversarial negotiating environment and a faster                                                          Leader. She can be reached at
                                                                                                                                  jennifer.reid@equifax.com.
shopping process.

Overall, does your dealership expect economic                               What is the single most important problem facing your business today?
conditions to improve, stay the same, or decline in                                           Q1                                   Q2
the auto industry over the next quarter?                                                                                                                       ECONOMIC             LACK OF            LACK OF          LACK OF
                                                                                             5%                                  5%                            CONDITIONS           QUALITY            QUALITY          CUSTOMER
		                        Q4                Q1                 Q2                       6%                                            10%                                           WHOLESALE          RETAIL           PROSPECT
IMPROVE                  50%               42%                39%                                  14%                     10%              9%                 GOVERNMENT           INVENTORY          INVENTORY        TRAFFIC/
                                                                                      11%                                                                      REGULATIONS/                                             LEADS
STAY SAME                39%               48%                46%                                        12%                                                   RED TAPE             INCREASED          LACK OF
                                                                                                                                             8%
DECLINE		                11%                9%                15%                                                         17%                                                       COST OF            FINANCING/       OTHER
                                                                                      12%                                                                      HEIGHTENED           DOING              CREDIT
                                                                                                         10%
Does your dealership plan to expand its business                                                                                         23%                   COMPETITION          BUSINESS           RESOURCES
                                                                                                                                                               FROM
over the next quarter? (i.e. add new equipment,                                             22%     8%                       9%
                                                                                                                                                               FRANCHISE
                                                                                                                                  8%
enhance your building/property)                                                                                                                                DEALERS
		                        Q4                Q1                Q2
		     YES               38%               34%                29%           Do you anticipate your dealership’s retail sales to                   Which of the following factors are making it more difficult
		      NO               62%               66%                71%           grow, stay the same or decrease over the next quarter?                for dealers to secure loans for their customers?
What percentage of the following categories makes                           			                    Q4               Q1            Q2                                                     Factors
up your total retail automobile sales?                                      GROW		                67%              50%            53%
                                                                            STAY SAME             26%              40%            35%                                         Tighter restrictions          40%
			                        Q4               Q1                 Q2                                                                                             to qualify buyer loans (credit tiers)
PRIME		                   40%              36%                42%           DECREASE               7%              10%            12%
BHPH		                    36%              40%                34%                                                                                           Less access to number of lenders                25%
SUBPRIME                  24%              24%                24%           Do you see your dealership’s cash flow improving,                           More verification of buyers background
                                                                                                                                                                                                           14%
                                                                                                                                                        (employment, income, residence address, etc)
Do you expect your dealership’s credit availability to                      staying the same, or declining over the next quarter?
                                                                            			                     Q4              Q1            Q2                       Worsening terms affecting ability to             25%
expand, stay the same or reduce over the next quarter?                                                                                            effectively compete with Franchise Dealers
                                                                            IMPROVE                56%             45%            44%
			                       Q4                Q1                 Q2           STAY SAME              33%             37%            33%                                                       Other           15%
EXPAND		                 31%               21%                26%           DECLINE		              11%             18%            23%
STAY SAME                67%               73%                72%                                                                                              It’s not more difficult for dealers          15%
REDUCE		                  2%                6%                 3%                                                                                                 to secure loans for customers
                                                                            Does your dealership expect customer traffic to
Do you anticipate your dealership’s total expenses                          increase, stay the same or decrease over the                                             Note: Numbers won’t necessarily add up to 100%

(cost of business) to increase, stay the same or                            next quarter?                                                                         because dealers can choose more than one response.
                                                                            			                     Q4              Q1            Q2              In which department does your dealership anticipate hiring
decrease over the next quarter?                                             INCREASE               63%             41%            49%
			                        Q4                Q1               Q2            STAY SAME              28%             42%            40%             new staff over the next quarter?
INCREASE                  57%               66%               67%           DECREASE                9%             17%            11%              		                       Q4                 Q1                 Q2
STAY SAME                 37%               29%               31%                                                                                  SALES                    50%               23%                 21%
DECREASE                  9%                5%                 3%                                                                                  FINANCE		                 8%                7%                  6%
Considering the following                                                                                                                          SERVICE		                29%               22%                 26%
                                                         Increase   Hold   Decrease                            Increase   Hold    Decrease         OTHER		                  13%                6%                  5%
marketing channels, please
indicate the level of investment      *DIGITAL            49%       46%      6%         NEWSPAPER              4%         68%         28%          DON’T		                    -               42%                 41%
your dealership plans to make               TV            2%        64%     34%            OUTDOOR             10%        59%         31%          ANTICIPATE
over the next quarter.                  RADIO             10%       63%     27%         DIRECT MAIL            9%         58%         33%          HIRING
                                                                                                                            *ONLINE AND MOBILE
12   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
                                                                                                                                                                                    In partnership with
W W W. N I A DA .CO M   13
BUY HERE-PAY HERE
                                                                                               2017
                                                                                               INDUSTRY
                                                                                               BENCHMARKS

Section 03

  For 2017, The National Alliance of Buy Here, Pay Here            these statistics provide a comprehensive look at the financial
Dealers (“NABD”) and Subprime Analytics, with the approval         and operating performance of the BHPH industry, and
and participation of the National Independent Automobile           important trend information.
Dealers Association (NIADA), prepared these industry
benchmarks from a database of dealer/operators nationwide.           Effective January 1, 2018, NIADA purchased the assets
The financial benchmarks included herein were prepared and         and operations of NABD and merged the two organizations.
contributed by SGC Certified Public Accountants (“SGC”).           Subprime Analytics has contracted to provide analytical
The financial information they used represents a composite         services, including periodic benchmark data, to NIADA in the
of the “best performing” operators and not an average              future to support important legal and regulatory positions for
of the entire industry. These benchmarks also include              the used car industry. On June 18-21 NIADA and NABD hold
operating information on sales, collections and recoveries,        a combined used car conference in Orlando at Rosen Shingle
and inventory management, supplied by NCM and NIADA                Creek Resort, where we discussed these benchmarks and
20 Groups from composites of their BHPH members. Also              trends to help operators understand the changing subprime
included are portfolio performance metrics which were              auto finance market. For further information, visit www.
compiled electronically by Subprime Analytics (“Subprime”)         bhphinfo.com or www.niada.com. Industry benchmark
which, to date, has analyzed approximately $20 billion             reports for the past five years can be downloaded free of
(nearly 2.0 million deals) of subprime installment contracts       charge at www.subanalytics.com.
to identify loss rates, patterns, and trends. In the aggregate,

2017 Year In Review!
       The financial benchmarks for 2017 continue to reflect a     3) Operators who did not increase the cost of vehicles
     high level of competition within the deep subprime market        they sold, lower their down payments, increase their
     that began in 2013. The more significant factors that            sales prices and the corresponding amounts financed,
     impacted deep subprime performance in 2017 were:                 enjoyed higher returns on their portfolio investments
      1) Unit sales were generally flat from 2016 volumes             and stronger collection results.
        However, operators increased sales prices and the          4) Recovery values for repossessed vehicles which were
        related amounts financed in an attempt to maintain            not retailed stabilized in 2017, but remain more than
        profitability. Absent corresponding increases in the          50% lower than realizations from a few years ago.
        down payments and repayments the terms of these               This caused increases in net charge-offs and lowered
        originations were lengthened. Individual operators            the average recoveries expressed as a percentage of
        were affected by varying levels of competition in             delinquency balances.
        their local markets. Rural markets again were less         5) Financing rates which approximated 20% per annum
        competitive than major urban cities. A few operators          have remained relatively consistent for the last three
        added lots in an attempt to gain market share but their       years in those states that do not have a mandated
        growth was restrained by capital availability. Experian       interest rate cap.
        automotive market data indicated a modest increase         6) A comparison of the business models used by the
        of only 0.4% in outstanding receivables for the BHPH          independent operators surveyed, compared with
        industry in 2017 with larger increases in used financing      those models used in deep subprime auto bond
        shifting to captives and to credit unions. Wall Street        securitizations, indicated lower amounts financed,
        auto securitizations of deep subprime paper slowed            shorter terms, and lower average monthly payments by
        dramatically in 2017. Securitizations previously fueled       the independents.
        significant growth in finance company portfolios           7) “Cash in deal,” which measures portfolio risk, increased
        during the last three years. Wall Street securitizers in      by approximately 12% when operators increased the
        2017 tightened underwriting criteria and shifted their        average cost of the vehicles they sold.
        emphasis to prime and near prime customers as the          8) Overall profitability improved slightly in 2017 due to
        year progressed.                                              higher financing income from new originations and
     2) Defaults on deep subprime auto bond securitizations           reduced operating expenses from cost-cutting.
        in 2017 created a tightening of credit availability for
        subprime auto. Banks and other regulated capital                      BY KENNETH SHILSON, CPA
        providers implemented more stringent underwriting                     Ken Shilson (ken@kenshilson.com)
                                                                              is president of Subprime Analytics
        criteria and shifted to higher credit quality customers.              (www.subanalytics.com) and
        Unregulated capital providers, like hedge funds and                   NABD (www.bhphinfo.com).
        specialty finance companies, are entering the subprime
        financing market to supplement the capital needs.

14   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
Section 03

                                                                                                                       What’s Ahead For 2018?
                                                                                                                           Although 2017 was a challenging and

                      COST OF GOODS SOLD AND
                                                                                                                       competitive year, some new profit opportunities
                                                                                                                       are ahead for independents in 2018 as follows:
                                                                                                                        1) Although capital availability for subprime

                     OPERATING EXPENSE DETAIL
                                                                                                                          auto will be tighter, competition from
                                                                                                                          finance companies and captives will
                                                                                                                          decline as they shift to higher credit quality
                                                                                                                          customers. This creates an excellent
                                                                   COST OF VEHICLE SALES                                  opportunity for independents to regain
                                                                                                % OF VEHICLE SALES
                                                                                                                          market share if they have capital available to
                                                          2014         2015            2016            2017               fund the growth.
                                                                                                                       2) Cash efficient business models will provide
                                 Cost of Vehicles         50.06%       49.59%          49.24%           49.47%            higher returns on portfolio investments and
                             Reconditioning Costs          7.63%        8.31%           8.39%            7.87%
                                            Other          2.72%        2.44%           3.13%
                                                                                                                          reduce portfolio risk.
                                                                                                         2.66%
                                                                                                                       3) Customer relationships are needed to regain
       TOTAL COST OF VEHICLE SALES                       60.41%       60.34%          60.76%           60.00%             and to retain the best subprime customers.
                                                                                                                          Operators who proactively use social media
                                                            TOTAL OPERATING EXPENSE                                       to connect and collect with customers will
                                                                                                                          do better. Advance tax refunds and irregular
                                                          2014         2015            2016            2017               payments also help regain market share.
                                                                                                                       4) In order to control operating costs,
                                          Advertising      3.82%        3.93%          3.74%           3.53%
                                      Bank Charges                                                                        implementing new technology to improve
                                                           0.28%        0.18%          0.17%           0.17%
                                       Contributions       0.03%        0.02%          0.03%           0.03%              efficiencies is recommended. The biggest
                                       Depreciation        0.46%        0.52%          0.49%           0.43%              historical BHPH “game changers” have been
                          Dues and Subscriptions           0.12%        0.14%          0.15%           0.21%
                                           Insurance                                                                      pay portals (ACH, debit cards, etc.), GPS to
                                                           0.29%        0.32%          0.31%           0.39%
                            Legal and Accounting           0.45%        0.28%          0.24%           0.22%              improve recoveries and collections, and the
                                   Outside Services        0.20%        0.38%          0.79%           0.46%              use of related finance companies to reduce
                                     Office Expense        0.83%        0.90%          0.79%           0.76%
                                                Rent
                                                                                                                          federal income taxes on “phantom income.”
                                                           2.20%        2.27%          2.28%           2.09%
                         Repairs and Maintenance           0.16%        0.34%          0.15%           0.31%              Texting is the next “game changer” to
                            Salaries (Non-Owners)         10.56%        11.36%         11.97%          11.00%             connect with and collect from
                                    Taxes - General        0.18%        0.07%          0.09%           0.12%           		 subprime customers.
                         Other Operating Expense           0.03%        0.23%          0.16%           0.06%
                                     Taxes - Payroll       0.84%        0.52%          0.51%           0.50%
                                                                                                                       5) As Congress enacts changes at the CFPB,
                           Utilities and Telephone         0.67%        0.42%          0.59%           0.41%              compliance still remains very important.
                                    Travel / Training      0.43%        0.38%          0.33%           0.31%              The state Attorneys General will become
           TOTAL OPERATING EXPENSE                       21.55%        22.26%         22.79%           21.00%             the new enforcers as the CFPB transfers its
                                                                                                                          enforcement power to them.
                                                                                                                       6) Competition for the best subprime
                                                              LOSS STATISTICS 2014-2017
                                                                                                                          customers has diluted their overall credit
                                                                         (STATISTICS SUPPLIED BY SUBPRIME ANALYTICS)
                                                                                                                          quality. Therefore, tighter scrutiny of
                                                          2014         2015            2016            2017               customer stipulations will be needed to
                                                          SUBPRIME   SUBPRIME   SUBPRIME   SUBPRIME                       “keep subprime vehicles sold.”
                                                         ANALYTICS  ANALYTICS  ANALYTICS  ANALYTICS                    7) While recovery rates stablized in 2017,
                                                        BENCHMARKS BENCHMARKS BENCHMARKS BENCHMARKS
                                                                                                                          further declines should be expected in later
      Average Gross Dollar Loss (Before Recoveries) $8,408              $8,111          $7,771          $9,175            model inventory where off lease and off
          Average Net Dollar Loss (After Recoveries) $5,749             $6,061          $5,916          $7,034            rental vehicles remain in abundant supply
        Average Default Rate (% of Loans Written Off) 31.16%            31.45%          33.96%          34.97%
     Average Gross Dollar Loss Rate (% of Principal) 38.57%             37.35%          38.76%
                                                                                                                          Operators must educate themselves on new
                                                                                                        40.66%
       Average Net Dollar Loss Rate (% of Principal) 26.37%             27.91%         28.42%          29.29%             market developments and market changes,
       Average Recovery (% of Principal Charged off) 31.60%             25.30%         23.87%          23.33%             the newest technology, state regulatory
  Highest Cumulative Default (Month After Origination) 18th Month     21st Month     22nd Month      22nd Month
Highest Frequency of Default (Month After Origination) 7th Month                                                          enforcement actions, and capital market
                                                                      7th Month       7th Month       7th Month
         Worst Periodic Loss (Month After Origination) February        February       February        February            availability to prosper on the
                                                                                                                          opportunities ahead.
                                  THE ABOVE REFERENCED LOSS DATA WAS DETERMINED BY ELECTRONICALLY ANALYZING
                                       APPROXIMATELY 1.7 MILLION LOANS, AGGREGATING APPROXIMATELY $15 BILLION,                     BY KENNETH SHILSON, CPA
                                                TO IDENTIFY LOSS RATES AND TO UNDERSTAND WHY THEY OCCURRED.
                                                                                                                                   Ken Shilson (ken@kenshilson.com)
                                               (FINANCIAL STATISTICS SUPPLIED BY SGC CERTIFIED PUBLIC ACCOUNTANTS)                 is president of Subprime Analytics
                                                                                                                                   (www.subanalytics.com) and
                                                                                                                                   NABD (www.bhphinfo.com).

                                                                                                                                                          W W W. N I A DA .CO M   15
Section 03

                                     2014-2017 DEALER OPERATING INFORMATION                                                               (STATISTICS SUPPLIED BY NCM ASSOCIATES, INC. AND NIADA)

                                                                                                                  2014                  2015                   2016                      2017
                                                                                                                   NCM                 NCM               NIADA DEALER 20  NIADA DEALER 20
                                                                                                                BENCHMARKS          BENCHMARKS          GROUP BENCHMARKS GROUP BENCHMARKS

                                                                                                 SALES
                                                        Average Units Sold Per Dealer (BHPH Deals Only)             550                   635                     708                       612
                                                                Average Cash In Deal Per Vehicle Sold             $5,777                 $6,353                 $6,466                    $5,922
                                                          Average ACV Per Vehicle Sold (Includes Recon)           $6,237                 $6,403                 $7,438                    $6,838
                                                          Average Reconditioning Cost Per Vehicle Sold            $1,207                 $1,221                  $811                      $824
                                                                        Average Gross Per Vehicle Sold            $4,484                 $4,675                 $5,868                    $5,013
                                                                               Average Down Payment
  NIADA DEALER                                                               Average Amount Financed
                                                                       Average Term Of Loan (In Weeks)
                                                                                                                  $1,089
                                                                                                                  $10,567
                                                                                                                                         $1,091
                                                                                                                                        $10,909
                                                                                                                                                                 $972
                                                                                                                                                               $12,862
                                                                                                                                                                                           $916
                                                                                                                                                                                         $10,935
     20 GROUP                                                                    COLLECTIONS /
                                                                                                                    153                   159                     186                       182

  BENCHMARKS                                                                       RECOVERIES
                                                                                                                                                                                           $92
 WERE USED FOR                                                       Average Weekly Payment Amount                   $89                  $91                   $98
                                                                     Percentage Of Accounts Past Due               16.3%                 17.6%                 17.9%                      17.3%
                                                                                                                     101                   82                    94                         88
   2016 & 2017
                                                          Average # Of Past Due Accounts Per Collector
                                                                          Average Loss Per Charge Off              $4,820                $5,058                $6,807                     $5,393
          IN COMPARISON                                                  Average Portfolio Delinquency             83.80%               83.10%                82.10%                     82.70%
                                                                                                Current            8.60%                 9.70%                  N/A                        N/A
             TO PAST NCM                                                                     0-10 Days               N/A                  N/A                 10.50%                     10.00%
             BENCHMARKS                                                                      1-15 Days             3.90%                 3.90%                  N/A                        N/A
                                                                                            11-29 Days               N/A                  N/A                  3.60%                      3.10%
                                                                                            16-29 Days             2.30%                 1.90%                 2.30%                      2.40%
                                                                                            30-59 Days             0.90%                 0.80%                 0.80%                      0.90%
                                                                                            60-89 Days             0.50%                 0.60%                 0.70%                      0.90%
                                                                                              90+ Days            100.00%               100.00%               100.00%                    100.00%

                                                INVENTORY MANAGEMENT
                                                                                  Vehicle Days Supply (Units)        91                    84                    59                         53
                                                                                     Average Inventory Aging       42.40%                41.30%                48.70%                     44.60%
                                                                                                  0-30 Days        23.70%                22.20%                23.50%                     24.80%
                                                                                                 31-60 Days        15.50%                14.70%                14.30%                     14.00%
                                                                                                 61-90 Days        18.40%                21.80%                13.50%                     16.60%
                                                                                                   91+ Days       100.00%               100.00%               100.00%                    100.00%

BHPH Financial Trends                                                                                               BHPH Financial Trends
Average Cost Per Vehicle 2014-2017                                SOURCE: SUBPRIME ANALYTICS                        Average Customer Down Payment 2014-2017
                                                                                                                    SOURCE: SUBPRIME ANALYTICS

7,000                                                                                                               900

                                                                                                                    800
6,000

                                                                                                                    700

5,000
                                                                                                                    600

4,000                                                                                                               500

                                                                                                                    400
3,000

                                                                                                                    300
2,000
                                                                                                                    200

1,000
                                                                                                                    100
                                                                        $6,397

                                                                                  $7,201
                                                              $7,268
                                               $7,150

                                                                                                                                                                         $714

                                                                                                                                                                                  $801
                                                                                                                                                               $784
                                                                                                                                                      $835

0                                                                                                                   0

                                             2014         2015         2016      2017                                                                2014     2015       2016    2017

16   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
W W W. N I A DA .CO M   17
Section 03

RATIO COMPARISONS, COMBINED BUY HERE-PAY HERE                                                                                                     (STATISTICS SUPPLIED BY SCG CERTIFIED PUBLIC ACCOUNTANTS)

                                                                                                                                             2014              2015             2016                   2017
                  COMBINED BUY HERE-PAY HERE BALANCE SHEET                                                                                 AVERAGE            AVERAGE          AVERAGE                AVERAGE

                          		                (Inventory X Days) / Cost Of Vehicle Sales                                                    55.82 days
                                                                                                                                            6.54x
                                                                                                                                                             53.44 days
                                                                                                                                                                6.73x
                                                                                                                                                                               53.21 days
                                                                                                                                                                                  6.89x
                                                                                                                                                                                                      50.54 days
                                                                                                                                                                                                        7.02x
                                      Cost Of Vehicle Sales / Average Inventory Dollars
                                                                                     Vehicle Sales / Average Inventory Dollars              11.47x             11.55x            11.39x                 11.72x
                                                                                                  Vehicle Sales / Total Assets              0.93x              0.89x             0.89x                  0.87x
                                                                                                 Total Assets / Total Liabilities           1.97x              1.78x             1.63x                  1.63x
                                                                              Allowance For Bad Debts / Finance Receivables*                 23%                24%               26%                    28%
                                                                                                      Total Debt / Total Assets              51%                56%               62%                    62%
                                                         * FINANCE RECEIVABLES ARE NET OF UNEARNED FINANCE CHARGES

     COMBINED BUY HERE-PAY HERE INCOME STATEMENT                                                                                             2014              2015             2016                   2017
                                                                                                                                           AVERAGE            AVERAGE          AVERAGE                AVERAGE

                                                 		                                                    Bad Debts / Vehicle Sales                  26%            25%             27%                     30%
                                                                                                                                                                                                         60%
                                                                                            Cost Of Vehicle Sales / Vehicle Sales                 60%            60%             61%
                                                                                                   Gross Profit*** / Vehicle Sales                31%             31%             29%                     29%
                                                                                              Operating Expense / Vehicle Sales                   22%            22%             23%                     21%
                                                                                            Interest Expense / Financing Income                   18%            19%             18%                     16%
                                                                                                Operating Income / Vehicle Sales                   9%             9%              6%                      8%
                                                                                                Financing Income / Vehicle Sales                  17%            16%             17%                     19%
                                                                                                 Compensation** / Vehicle Sales                   11%           11.4%            12%                     11%
                                                                                             Reconditioning Cost / Vehicle Sales                   8%            8.3%            8.4%                    7.9%

                                                                                       NOTES TO RATIO COMPARISONS:
                                                                       **COMPENSATION EXCLUDES THOSE OF THE OWNERS
                                                          ***GROSS PROFIT IS NET OF BAD DEBTS AND FINANCING INCOME
                                                                                                                        X = TIMES

                                                                                                          RATIO COMPARISONS, BUY HERE–PAY HERE INDUSTRY
                                                                                                                 BENCHMARKS PREPARED FOR NABD BY SGC CERTIFIED PUBLIC ACCOUNTANTS
                  THE NABD RESULTS - COMBINED DEALER AND FINANCE AFFILIATE NUMBERS - BREAK DOWN BALANCE SHEETS AND INCOME STATEMENTS INTO 16 CATEGORIES.
                                                                      IT ALSO COMPARES 2017 TO THE PAST THREE YEARS SO DEALERS CAN EXAMINE INDUSTRY TRENDS.

 BHPH Financial Trends Costs/Expenses 2014-2017                              		                        BHPH Financial Trends                                          BHPH Financial Trends
 NOTE: ALL EXPENSES ARE EXPRESSED AS A PERCENTAGE OF TOTAL SALES
                                                                                                       Average “Cash In Deal”                                         Average Amount Financed
 •   COST OF VEHICLES
                            •    OPERATION EXPENSES
                                                                                                       2014-2017           AVERAGE CASH IN
                                                                                                                          DEAL PER UNIT SOLD
                                                                                                                                                                      2014-2017
 60

 55
                                                                                                           6,500
 50                                                                                                        6,000                                                      12,000

 45                                                                                                        5,500                                                      11,000

 40                                                                                                        5,000                                                      10,000

 35                                                                                                        4,500                                                      9,000

                                                                                                           4,000                                                      8,000
 30
                                                                                                           3,500                                                      7,000
 25
                                                                                                           3,000                                                      6,000
 20
                                                                                                           2,500                                                      5,000
 15
                                                                                                           2,000                                                      4,000
 10                                                                                                                                                                   3,000
                                                                                                           1,500
 5                                                                                                         1,000                                                      2,000
                                                                               60%
            60%

                                                                                        21%
                                                              61%
                       22%

                                                                       23%
                                       60%

                                                  22%

                                                                                                                                                                                                                $11,951
                                                                                                                                                                                  $10,765

                                                                                                                                                                                                      $11,015
                                                                                                                                                                                            $11,090
                                                                                                                                                   $6,400
                                                                                                                                         $5,683
                                                                                                                                $6,484
                                                                                                                       $6,315

 0                                                                                                         500                                                        1,000
                2014                         2015                   2016             2017                  0                                                          0
                                                                                                                      2014 2015 2016 2017                                        2014 2015 2016 2017

                                        SOURCE: SUBPRIME ANALYTICS                                                 SOURCE: SUBPRIME ANALYTICS                                  SOURCE: SUBPRIME ANALYTICS

18   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
W W W. N I A DA .CO M   19
Section 03

BUY HERE-PAY HERE INDUSTRY BENCHMARKS
BHPH Financial Trends
                                                                                                     BHPH LOSS METRICS-2017
Average Vehicle Cost, Cash Down Payment, Cash in Deal:                                                                                                             2016             2017
Two-Year Snapshot           SOURCE: SUBPRIME ANALYTICS
                                                                                                                                                                 BENCHMARK      BENCHMARK

                                                                                                     Average gross dollar loss (before recoveries)                 $7,771          $9,175
                   2016                                                     2017                     Average net dollar loss (after recoveries) 		                  $5,916         $7,034
 7,000                                                  7,000
                                                                                                     Average default rate (% of loans written off) 		               33.96%          34.97%
                                                                                                     Average recovery (% of vehicle cost) 		                        23.87%         23.33%
 6,000                                                  6,000                                        Highest cumulative default month after origination          22nd Month      22nd Month
                                                                                                     Highest frequency of default (month after origination)       7th Month       7th Month
 5,000                                                  5,000
                                                                                                     Worst periodic loss month after origination 		               February         February
 4,000                                                  4,000                                                                                                     SOURCE: SUBPRIME ANALYTICS

 3,000                                                  3,000

 2,000                                                  2,000

 3,000                                                  3,000
                                  $714

                                                                                   $801

                                                                                            $6,400
                                             $5,683

                                                                       $7,201
                $6,397

 1,000                                                  1,000

 0                                                      0
                            BHPH                                                 BHPH

     •   AVERAGE VEHICLE COST
                                         •   AVERAGE CASH DOWN
                                                                       •   AVERAGE CASH IN DEAL

AVERAGE VEHICLE COSTS, CASH DOWN & AVERAGE CASH
IN DEAL AMOUNTS INCREASED DRASTICALLY FROM 2016-2017

      BHPH Financial Trends                                                                                    BHPH Financial Trends                  NOTE:
      Average Recovery Dollars Per Charge Off 2014-2017                                                        Bad Debts 2014-2017              PERCENTAGES
                                                                                                                                                ARE BASED AS
      SOURCE: SUBPRIME ANALYTICS                                                                               SGC CERTIFIED PUBLIC           PERCENTAGE OF
                                                                                                               ACCOUNTANTS                     VEHICLE SALES.

                                                                                                               30
     3,000

                                                                                                               25
     2,500

                                                                                                               20
     2,000

                                                                                                               15
     1,500

     1,000                                                                                                     10

     500                                                                                                       5
                                                              $1,855
                                               $2,050
                         $2,659

                                                                                $2,141

                                                                                                                                                          27%
                                                                                                                                            25%
                                                                                                                              26%

                                                                                                                                                                      30%

     0                                                                                                         0

                         2014                2015             2016              2017                                         2014          2015           2016       2017

     BHPH Financial Trends                                                                                     BHPH Financial Trends
     Average Weekly Payment Amount                                                                             Average Original Term (Months)
     2014-2017 SOURCE: NCM, SUBPRIME ANALYTICS                                                                 2014-2017 SOURCE: NCM, SUBPRIME ANALYTICS
     90

                                                                                                               45
     80                                                                                                        40
                                                                                                               35
     60                                                                                                        30
                                                                                                               25
     40                                                                                                        20
                                                                                                               15
     20                                                                                                        10
                                                                                                               5
                         $89

                                                                                $90
                                                              $88
                                               $89

                                                                                                                                                          43
                                                                                                                                            42
                                                                                                                              40

                                                                                                                                                                      44

     0                                                                                                         0
                         2014                2015             2016              2017                                         2014         2015           2016        2017

20   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
W W W. N I A DA .CO M   21
NADA USED CAR SALES BY
MONTH BY CHANNEL
                                                                                                              2018
                                                                                                              FULL-YEAR
                                                                                                              EXPECTATIONS

Section 04                                                                USED UNITS SOLD BY NEW CAR DEALERS
                                                                          		         2015      2016     2017
2018 J.D. POWER VALUATION SERVICES
USED VEHICLE PRICE UPDATE                                                    January    719,904                     785,159            816,509
   The used vehicle market has performed exceptionally well in 2018.        February    660,171                     756,414            810,355
Through July, the J.D. Power Valuation Services’ Seasonally Adjusted           March    916,664                     813,834            844,694
Used Vehicle Price Index reached 119.3, a figure 4.7-percentage                 April  1,298,815                   1,371,871          1,344,962
points above year-ago levels and 4.8-points above January 2018.                  May   1,558,152                   1,534,867          1,479,451
Used vehicle prices really started showing strength in the middle               June   1,601,582                   1,670,202          1,615,366
half of 2017, and the trend has continued deep into the summer                   July  1,625,629                   1,687,580          1,636,852
selling season this year.                                                     August   1,485,028                   1,527,600          1,551,214
   Most of the used market’s strength has been driven by                   September   1,363,032                   1,383,885         1,683,582
mainstream car growth. Compact car prices are up 9% from                     October   1,153,571                   1,182,376         1,122,971
January’s level, followed by midsize and large car gains of 7%,            November    1,118,468                   1,142,912         1,102,685
respectively. Mainstream SUV prices have also shown significant            December    1,146,519                   1,111,505         1,099,194
positive movement, but not to the same degree as cars. For example,           Annual  14,647,535                  14,968,206         15,107,834
compact utility and midsize utility prices have increased 3%. While
things are primarily positive on the mainstream side of the market,       USED UNITS SOLD BY USED CAR DEALERS
large SUV has registered a 2% decline, which can be largely explained
by a 28% increase in 0-5-year-old wholesale volume.                       		         2015      2016     2017
   Luxury segments are not performing as well as nearly all have
experienced declines so far this year. Luxury large utility prices have             January        649,520          728,477            787,664
deteriorated the most and are down 6% from January’s level, while                  February        585,753          692,694            732,974
luxury compact utility prices are down ~2%. Other luxury segment                      March        828,143          845,755            841,737
losses haven’t been as severe as prices for the collective are down                    April      1,165,797        1,193,325          1,257,944
by roughly 1%.                                                                          May       1,380,956        1,384,316          1,358,257
   There are a few drivers behind the overall strength of the used                     June       1,440,989        1,557,425          1,527,458
market, including an increased dealer focus on used vehicle                             July      1,434,379        1,550,679          1,525,680
operations and vehicle affordability.                                                August       1,309,380        1,355,591          1,389,770
   Consumers can save money buying a well-maintained late-model                   September       1,275,535        1,313,715         1,620,229
used vehicle, while dealers can capitalize on used vehicle sales                    October       1,110,777        1,129,856         1,062,191
where profit margins are higher than for new vehicle sales. Many                  November        1,040,714        1,075,138           998,386
of the country’s top public dealership groups are capitalizing on                 December        1,097,073        1,065,952         1,004,248
this dynamic and the benefits were apparent in their latest earning                  Annual      13,319,015       13,892,922         14,106,537
reports. In their Q2 2018 earnings reports, Penske Automotive
Group Inc., Group 1 Automotive Inc. and Sonic Automotive Inc. each        USED UNITS SOLD BY PRIVATE PARTY SALES
increased used vehicle sales by sizeable amounts, up 10%, 13% and
17%, respectively. Each dealer group also credited used sales for the     		         2015      2016      2017
increase in profits and they continue to state plans for even bigger
investments in used operations in the future.                                       January      563,671            585,720            614,600
   While the used market is doing well, the year’s improvement                     February      513,622            606,364            606,154
highlights the need for stakeholders to maintain diligence in their                   March      704,595            721,436            717,570
understanding of market dynamics and trends expected in the                            April    1,062,763          1,056,427          1,038,031
future. To that end, J.D. Power Valuation Services expects used                         May     1,269,839          1,274,443          1,215,582
vehicle prices for units up to eight years in age to increase by 1% in                 June     1,309,554          1,343,623          1,319,513
2018 relative to 2017.                                                                  July    1,286,594          1,293,240          1,271,296
   Negatives associated with weaker credit conditions, modestly                      August     1,197,603          1,212,251          1,274,272
higher incentives and yet another increase in used vehicle supply                 September     1,053,285          1,054,800         1,320,530
(+3% vs. 2017 for vehicles up to 5 years old) are expected to be                    October      836,649            824,044            926,019
offset by stronger employment, home prices, driving demand, and                   November       831,375            862,575           921,130
continued increases in vehicle quality. Gasoline prices are expected              December       846,755            859,443           943,919
to have a relatively neutral impact.                                                 Annual    11,476,307         11,694,366         12,168,616
   SUV prices are expected to soften as more units return to the used
market (especially compact SUVs). Mainstream passenger car prices               USED VEHICLE RETAIL SALES BY YEAR TOTALS
should continue to firm up as supply falls, while luxury car prices
will soften due to the increased competitive pressure associated                                  2015              2016               2017
with SUVs and mainstream cars whose prices are lower, yet whose
design and optional equipment continue to push into luxury                  New Car Dealers      14,647,535       14,968,206         15,107,834
territory. Overall, 2018 should see used vehicle prices rebound back       Used Car Dealers      13,319,015       13,892,922         14,106,537
to levels recorded two years ago, placing them 5% below the record        Private Party Sales    11,476,307       11,694,366         12,168,616
high observed in 2014.                                                                TOTAL      39,442,856       40,555,494         41,382,987
                                                                                                    SOURCE: NATIONAL AUTOMOBILE DEALERS ASSOCIATION
22   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
W W W. N I A DA .CO M   23
AUTO BUYING PATTERNS
BY BODY STYLES
                                                                       2018 DATA REVEALS
                                                                       SHOPPER HABITS &
                                                                       PRICE TRENDS

Section 05
Dealers already know that a truck buyer and an SUV buyer want different things — but at CarGurus, we like to get
at the data behind auto shopping patterns and pricing trends. Here’s a look at how pickup, SUV, and sedan buyers
differ, according to data from CarGurus user activity and a survey of auto buyers of all types.

SUV buyers talk to dealers, pickup buyers do direct research
When we look at research habits of these types of             That theme carries through to their activities on
buyers compared to the general population, we see that        CarGurus, too. Truck buyers are more likely to read
SUV buyers are more likely to contact and engage with         customer reviews of specific cars (34.9% increase vs.
dealerships, while pickup truck buyers are more likely        baseline) — and much less likely to read expert reviews
to gather unbiased information themselves, through            (58.8% decrease).
videos, talking to friends and family, and going directly
to the manufacturers’ sites.

Increase in shopping activities compared to average used car buyers

                     Pickup buyers                                       SUV buyers

Top buyer concerns: pricing, choosing the right car
Overall, buyers are about evenly split on the most difficult factors, with 38% saying pricing and deal factors were the
most challenging, and 36% saying it was choosing the right car. Digging into the concerns of SUV and truck buyers
reveals some variation:

Most difficult parts of the buying process

                     Pickup buyers                                       SUV buyers

1.     Negotiating price                                        1.   Finding right fit/deciding on car
2. Finding the right fit/deciding on car                        2. Finding car in price range
3.     Finding car in my price range                            3.   Negotiating price
4. Dishonest salespeople/false                                  4. Loan/financing process
       advertising/inaccurate info                              5.   Dishonest salespeople/false
5.     Finding a good, quality car                                   advertising/inaccurate info

24   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
Section 05

What do they know when they start shopping?

           Truck buyers                           SUV buyers                            Sedan buyers

              38.9%                                 58.8%                                  47.1%
      more likely to know the                more likely to know the                more likely to know the
      exact model they want                     color they want                        color they want

               36%                                  47.8%                                  21.7%
more likely to know what they’ll do          more likely to know the                more likely to know the
 with the vehicle they’re replacing            specific dealership                    specific dealership

               27%                                  28.6%                                   8.5%
      more likely to be certain            more likely to know specific           less likely to know the price
       about type of vehicle               awards or ratings they want                they’re willing to pay

              25.7%                                 26.3%                                   5.4%
    less likely to know specific             more likely to know the              less likely to know whether
    awards or ratings they want                features they want                    they’d buy new or used

Body styles highlight urban/rural divide
In addition to varying buying habits, we can also see differences in the most popular body style by region.
This map shows the most popular of pickups, sedans, and SUVs by metropolitan area.

Pickups tend to dominate in
more sparsely populated or rural
regions. That’s not a huge surprise
— pickups make sense for farming,
ranching, and other rural uses, and
smaller cars make sense to many
city dwellers. It is interesting to see
how granular the city/rural divide
is. Yes, Texas loves pickups — but
in Houston, Austin, San Antonio,
El Paso, Dallas, and Ft. Worth, and
some surrounding areas, sedans are
more frequently the first choice.

In more urban or suburban areas,
SUVs dominate in northern
climates, sedans win in the south.
Again, not shocking: for AWD and
general performance in snow, it makes sense that SUVs are more commonly searched in the colder parts of the
country. The coasts aren’t quite as into SUVs as the interior portions of the country, even as you move north into
Seattle, or up the east coast as far as Boston.

                                                                                                    W W W. N I A DA .CO M   25
Section 05

Pricing trends swing away from pickups, towards sedans

     Used car prices by body style, July 2017 - June 2018

                                                                                                                 pickup

                                                                                                                 suv

                                                                                                                 sedan

     Over the 13 months from July 2017 to July 2018, the overall trend isn’t
     dramatically volatile. However there are notable fluctuations in each             Pickup owners keep vehicles longer
     group, particularly from the first half of the year to the second:
                                                                                       One possible reason for different
                                                                                       research habits? On average, pickup
                                             Jul ’17-Jan ’18         Jan ’18-Jul ’18   buyers tend to hang onto their
                                                                                       vehicles longer — 6 months longer
                                                                                       than SUV buyers, and a year longer
                                                              2.6%          0.3%       than sedan buyers.
        Pickup
                                                                                       Average years of ownership

                                                              5.2%         1.2%
           SUV                                                                                                5.25
                                                                                          Pickup

                                                              1.0%         2.5%
       Sedans                                                                                                 4.75
                                                                                           SUV
In the second half of 2017, SUV (and to a lesser extent, pickup truck)
prices were climbing steadily, while sedan prices were falling. But from
the beginning of 2018, the picture changed: SUV price growth slowed                                           4.24
considerably, pickup prices flattened out entirely, and sedan pricing                     Sedans
rebounded to grow 2.5% in the first six months of the year.

The contrast in the two periods is interesting. The end of 2017 was
strong evidence of the continued ascendency of SUVs, with prices up                      All used             4.56
significantly while sedan prices fell. But perhaps the scales swung a
little too far, as the first half of 2018 saw sedan prices grow twice as fast
as SUVs.

Sources: Regional searches and pricing data from internal CarGurus data, July 2018.
All other data from GfK / CarGurus Automotive Study, 3/2018, n=3008.
26   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
W W W. N I A DA .CO M   27
TESLA: COMING IN HOT!
                                                              DISRUPTOR
                                                              OR JUST
                                                              ANOTHER EV?

Section 06

28   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
Section 06

30   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
W W W. N I A DA .CO M   31
2018 CAR BUYER
JOURNEY STUDY
                                                                                                FOR MORE INFORMATION, VISIT
                                                                                                WWW.COXAUTOINC.COM/LEARNING-CENTER

Section 07

             SHOPPERS ARE SPENDING LESS TIME IN-MARKET
             Used-vehicle shoppers are spending seven fewer days in market for a car than last year. And, 2 in 3 state that they
             need, rather than want, a new vehicle.

                                                                       TOTAL DAYS SPENT IN MARKET

                                                               2018           108     Used
                                                                                      Buyers    109     New
                                                                                                        Buyers

                                                               2017           115     Used
                                                                                      Buyers    104     New
                                                                                                        Buyers

                                                                 SHOPPING DRIVEN BY NEED VS. WANT
                                  NEED A NEW VEHICLE                                                  WANT A NEW VEHICLE

            2018                           64%                Used
                                                              Buyers   54%   New
                                                                             Buyers            2018       36%    Used
                                                                                                                 Buyers   46%   New
                                                                                                                                Buyers

                                                              Used           New                                 Used           New
            2017                           58%                Buyers   47%   Buyers            2017       42%    Buyers   53%   Buyers

             BUYERS WANT TO KNOW THE TOTAL PRICE OF THE VEHICLE
             While 53% of car buyers look for monthly payment information while researching
             a vehicle, 47% of buyers said that the total price of the vehicle is more important
             than the monthly payment.                                                                                47%
32   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
Section 07

CAR BUYERS SPEND 63% OF THEIR TIME ONLINE
(among those who shopped online)

             USED BUYERS                                                             NEW BUYERS
     TOTAL TIME
         SPENT       15:20 HOURS                                         TOTAL TIME
                                                                             SPENT              12:31 HOURS                   Researching &
                                                                                                                              Shopping Online

                          13%                                                                            13%                   Talking with
                                                                                                                               Others
                                                                                                                               With the
                                                                                                                               Dealerships/ Seller
                                                                                                                               where Purchased
                                                                                                                     26%
                                      20     %                    55%                                                          Researching
                                                                                                                               & Shopping
                                                                                                                               with Print

  63%                                                                                                                         Visiting Other
                                                                                                                              Dealerships/
                                 1%                                                                                           Sellers

                          3 %
                                                                                              3%            3%

THIRD-PARTY SITES ARE THE MOST-USED SITES FOR ONLINE CAR SHOPPING
While car buyers use a variety of sites to shop, third-party sites are the most-used site of any online resource.

                                            SOURCES USED TO SHOP*
                                                                                                                 78%             Total

                       3rd Party Sites                                                                      67%                  New
                                                                                                               82%               Used

                                                                                              53%
                           Dealership                                                         56%
                                                                                              52%

                                                                             29%
                            OEM Sites                                                       44%
                                                                     23  %

                                       *Respondents were asked, “Please select the names of the specific
                                      website(s)/apps that you used.” Some selected more than one answer.

                                                                                                                                3%
                                                                                                                                         12%
TIME SPENT ON VARIOUS SITES
                                                                                                            69   %

                                                                                                                                               5%
Buyers continue to spend most of their time shopping on third-party sites.
                                                                                                                           USED
   3rd Party Sites       Dealership Sites            OEM Sites               Search              Other

                                                                                                                                          11%

                                                                                                                                   W W W. N I A DA .CO M   33
Section 07

             BUYERS MOST OFTEN START AT THIRD-PARTY WEBSITES
             When researching online, Used buyers often start and end at third-party sites. Dealers should focus on unique ways
             to deliver a consistent overall message across all sites. It is also critical that dealership websites are user-friendly,
             compelling, easy to search, consistent across devices and accurately reflect the pricing, incentives, services and
             amenities that are offered when the consumer visits the brick-and-mortar dealership.

                                                                    FIRST AND LAST WEBSITE VISITED
                                                                 USED // FIRST                                         USED // LAST

                                   3rd Party Sites
                                                                      61%                           3rd Party Sites
                                                                                                                         51%
                                               Search
                                                                      18%                                   Search
                                                                                                                          6%
                                          OEM Sites
                                                                       6%                               OEM Sites
                                                                                                                          5%
                                Dealership Sites
                                                                      15%                          Dealership Sites
                                                                                                                         38%

             BUYERS ARE LEAST SATISFIED WITH LONG PURCHASE PROCESS
                                                          SATISFACTION WITH DEALERSHIP PROCESS
                                                                                               USED

                                  69%                            76%                72%                   60%              57%           45%
                                                                                                                                              00:00

                             Your overall                     The test-driving   Interactions          The selection    Interactions     How long the
                             experience with                  process            with dealership       of inventory     with financing   process took
                             the dealership                                      sales people          available        department

                                                                                                                                                 64     %
             WHAT PART OF THE PROCESS TOOK LONGER THAN YOU EXPECTED?*
             FINANCING/PAPERWORK
             Buyers spend nearly 40 minutes idle at the dealership. Leaving customers idle has the potential
             to lead to headaches in finalizing the sale, as some start to rethink the deal during that time.

             *Among buyers who were dissatisfied with how long the process took

34   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
W W W. N I A DA .CO M   35
AUTOMOTIVE FINANCE
MARKET
                                                                     EXPERIAN’S 4TH Q 2017
                                                                     STATE OF THE AUTOMOTIVE
                                                                     FINANCE MARKET

Section 08

  The following is taken from Experian’s 4th Quarter 2017                                                     Additionally, Experian published a summary of their
State of the Automotive Finance Market Report. For the                                                      entire 4th quarter 2016 report below:
purposes of this section, we highlight the reliance upon                                                     • Outstanding loan balances continue to set record highs
financing and automotive loans by risk segment and by                                                        • Delinquency rates beginning to improve
lender type. Average credit scores by vehicle type are also                                                  • Leasing remains strong with over 28% of all new
noted. The second page of this section details average                                                         consumer vehicle sales
amounts financed, average used monthly payments,                                                             • Credit scores improve as lending continues to shift into
average used loan term, and average used loan rates. This                                                      more prime segments
section also highlights all four major areas broken down                                                     • Deep subprime reaches record lows in used lending
by loan type. The sidebar to the very right details leasing                                                  • Loan amounts and payments reach record highs for
data.                                                                                                          both new and used vehicle financing
                                                                                                             • While longer term loan remain the norm, there’s a
                                                                                                               decrease in 72-84 month loans in both new and used
                                                                                                               financing; while new sees slight growth in 85+

                Used Automotive Finance                                         Average Credit Scores by Vehicle Type                       New & Used Automotive Loans
                    by Lender Type                                                                                                              by Risk Distribution
                        Q4 2017                                                                                                                       Q4 2017
          15.8%                                                                                                                           39.31%
                                                                            740 -
                                                                                       715
                                                                                                  712      711      711      713                                              20.39%
                                                           34.8%            720 -

                                                                            700 -
                                                                                       673                673       677      681
                                                                            680 -                 672
                                                                            660 -

                                                                            640 -
28.4%
                                                                            620 -                         607       614 617
                                                                                                  603                                                                         18.82%
                                                        12.4%                          600                                              18.22%
                                                                            600 -
                         8.6%                                                                                                                          3.27%
                                                                            580 -
                                                                                    Q4 2013    Q4 2014   Q4 2015   Q4 2016   Q4 2017
                                                                                      NEW
                                                                                      FRANCHISED USED
                                                                                      INDEPENDENT USED

Percentage of Consumers by                                                          Used Risk Distribution                                       Reliance Upon Financing
Risk Tier Choosing Used Loans                                                                                                                    PERCENTAGE OF VEHICLES WITH FINANCING
                                                                                       Deep Subprime

•    Q4 2016
                •    Q4 2017                                                           Subprime
                                                                                       Nonprime
                                                                                                                                                 80
                                                                                                                                                          85.1%

                                                                                       Prime
                                                                                                                                                 70
     2%
     7%

                                                                                       Super Prime
   .9
  .2
91
91

                                                                                                                                                 60
                       %
                    0%
                     5

                                                                                                                                                                         53.8%
                  .7

                  .7
                79

                79

                                                                                               11.90%		                        11.97%
                                        %

                                                                                                                                                 50
                                      7%
                                    .17

                                   .2
                                 68

                                                        2%
                                 67

                                                       5%
                                                      .5

                                                     .2

                                                                                               35.86%		                        36.55%            40
                                                    58

                                                   57

                                                                        5%

                                                                       3%
                                                                      .8

                                                                                                                                                 30
                                                                     .2

                                                                                               22.09%		                        22.02%
                                                                    41

                                                                   40

                                                                                                                                                 20
                                                                                               24.79%		                        24.37%
                                                                                                                                                 10
                                                                                                5.36%		                        4.92%
   Deep           Subprime         Nonprime            Prime        Super                                                                          0
 Subprime                                                           Prime                      Q4 2016                        Q4 2017
                                                                                                                                                           NEW             USED

36    2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
W W W. N I A DA .CO M   37
Section 08

                                                         •                •                                                             •              •
                                                                                                                                                                               LEASING
            Average Used Loan Term                             Q4 2016         Q4 2017     Average Used Loan Term                           Q4 2016        Q4 2017

                                  48                60               72

                                                                                                                                               .73
                                                                                                                                 .11

                                                                                                                                           65 2
                                                                                                                              65 1

                                                                                                                                              .4

                                                                                                                                                            .06
                                                                                                                                                                               DATA

                                                                                                                                .9

                                                                                                                                                        6266
                                                                                                                 61 78

                                                                                                                                           65
                                                                                                                   .71

                                                                                                                             64
                                                                                                  58 3
                                                                                                    .25

                                                                                                                                                          .
            Q4 2016                                                                         65

                                                                                                                    .
                                                    63.00

                                                                                                                                                       61
                                                                                                     .3

                                                                                                                 61
                                                                                                  58
            Q4 2017                                   64.12                                 45
                                                                                                       DEEP       SUBPRIME      NON          PRIME         SUPER
            Used                                                                                     SUBPRIME                  PRIME                       PRIME               Leasing remains very prime
            Independent
            Q4 2016                                  59.00                                   2017 EXPERIAN INFORMATION SOLUTIONS, INC. ALL RIGHTS RESERVED.                    despite a drop in prime level
            Used                                                                             EXPERIAN PUBLIC
                                                                                                                                                                               consumers choosing to lease.
            Independent                                60.20
            Q4 2017
             2017 EXPERIAN INFORMATION SOLUTIONS, INC.
             ALL RIGHTS RESERVED. EXPERIAN PUBLIC
                                                                                                                                                                               % of New Borrowers
                                                                                                                                                                               Choosing to Lease

                                                                                                                                                                               Prime +
                                                                                                                                                                                                                            33.8%
                                                                                                                                                                                                                             34.8%
            Average Used Loan Rate                       •    Q4 2016
                                                                          •   Q4 2017      Average Used Loan Rate
                                                                                           BY LOAN TYPE
                                                                                                                                       •   Q4 2016
                                                                                                                                                      •    Q4 2017
                                                                                                                                       SOURCE: EXPERIAN AUTOMOTIVE                                                       30.0%
                                                                                                                                                                               Nonprime
                                                                                                                                                                                                                          31.6%
                             2         4        6        8         10+
                                                                                                            %
                                                                                                     19 3%
                                                                                                        .32

                                                                                                                           %
                                                                                                        .0

                                                                                                                                                                                                                     23.4%

                                                                                                                    16 %
                                                                                                                                                                               Deep
                                                                                                     19

                                                                                                                       .27
                                                                                            20%
                                                                                                                     .70                                                       & Sub
                                                                                                                                                                                                                      24.2%
                                                                                                                  15
        Q4 2016                                               8.5%
                                                                                                                                                                                              •              •
                                                                                            15%

                                                                                                                                        %
                                                                                                                                                                                                  Q4 2017        Q4 2016

                                                                                                                                  .01
                                                                                                                                10 %
                                                                                                                                  9
        Q4 2017                                                8.84%                        10%                              9.4

                                                                                                                                                  8%

                                                                                                                                                                                                               6%
                                                                                                                                                                                         4%

                                                                                                                                                9%
                                                                                                                                              5.4
        Used

                                                                                                                                                                                                             4.0
                                                                                                                                                                                                       %
                                                                                                                                                                0%
                                                                                                                                            5.0

                                                                                                                                                            3.8 %
                                                                          11.23%

                                                                                                                                                                                                    3.9
        Independent                                                                          5%                                                                                          3%

                                                                                                                                                               9
                                                                                                                                                           3.3
        Q4 2016
        Used                                                                                 0%                                                                                          2%
        Independent                                                       11.48%
        Q4 2017                                                                                         DEEP      SUBPRIME       NON           PRIME        SUPER                        1%
                                                                                                      SUBPRIME                  PRIME                       PRIME
        YOY CHANGE / SOURCE: EXPERIAN AUTOMOTIVE                                                                                                                                       0%
                                                                                                                                                                                                     Q4       Q4
        2017 EXPERIAN INFORMATION SOLUTIONS, INC. ALL                                                                                                                                               2016     2017
        RIGHTS RESERVED. EXPERIAN PUBLIC
                                                                                                                                                                                              USED % OF LEASE MARKET

           Average Amount Financed                       •    Q4 2016
                                                                          •   Q4 2017      Average Used Amount Financed by Loan Type                            SOURCE: EXPERIAN AUTOMOTIVE
                                                                                                                                                                                                   •   Q4 2016
                                                                                                                                                                                                                 •     Q4 2017

                                                                                                                                                                                          62
Q4 2016                                                                         $30,621

                                                                                                                                                                                                                    55
              NEW                                                                                                                                                               48

                                                                                                                                                                                                         21
                                                                                                                                                                     47

                                                                                                                                                                                         1,1
                                                                                                                                                            03

                                                                                                                                                                                                                 0,6
                                                                                                                                                                              0,7

                                                                                                                                                                                                       0,2
                                                                                                                                                                   9,3

           (+$478)
                                                                                                                                                                                    $2
                                                                                                                                                          9,1
                                                                                                                                 30

                                                                                                                                             57

                                                                                                                                                                                                               $2
                                                                                            21K
                                                                                                                                                                             $2

                                                                                                                                                                                                     $2
                                                                                                                                                                   $1

Q4 2017
                                                                                                                                                       $1

                                                                                 $31,099
                                                                                                                                6,4

                                                                                                                                          6,5
                                                                                                                     63
                                                                                                           33

                                                                                            18K
                                                                                                                             $1

                                                                                                                                        $1
                                                                                                                   4,8
                                                                                                         4,6

                                                                                                                 $1
                                                                                                       $1

Q4 2016 USED                                                                                15K
                                                                $19,329
           (+$260)                                                                          12K
Q4 2017
                                                                 $19,589                     8K

                                                                                             5K
Used
Independent                                              $16,765
Q4 2016                                                                                          0
Used                                                                                                         DEEP                SUBPRIME                    NON                 PRIME                      SUPER
Independent                                                                                                SUBPRIME                                         PRIME                                           PRIME
Q4 2017
                                                              $17,002
 2017 EXPERIAN INFORMATION SOLUTIONS, INC. ALL RIGHTS
 RESERVED. EXPERIAN PUBLIC

            Average Used Monthly Payment                                                   Average Used Monthly Payment by Loan Type                            SOURCE: EXPERIAN AUTOMOTIVE
                                                                                                                                                                                                         •   Q4 2016
                                                                                                                                                                                                                        •   Q4 2017

            •   Q4 2016
                            •    Q4 2017
                                                                                                                      90
                                                                                                                    $3

                                                                                                                                             85

            Q4 2016                                                                        $390
                                                                                                            80

                                                                                                                                            $3

                                                                        $364
                                                                                                                                   78
                                                                                                          $3

                                                                                                                                                                     71

                                                                                           $380
                                                                                                                                 $3

                                                                                                                                                                     $3

                                                                                                                                                                                                                           65
                                                                                                                                                                                              64
                                                                                                                                                            64

            Q4 2017                                                        $371            $370
                                                                                                                                                                                                                 60

                                                                                                                                                                                                                        $3
                                                                                                                                                                                         $3
                                                                                                                                                           $3

                                                                                                                                                                                  57

                                                                                                                                                                                                              $3
                                                                                                                                                                               $3

                                                                                           $360
       Used
       Independent                                                 $353                    $350
       Q4 2016
                                                                                           $340
       Used
       Independent                                                   $360                  $330
       Q4 2017
                                                                                           $320
       2017 EXPERIAN INFORMATION SOLUTIONS, INC. ALL RIGHTS
       RESERVED. EXPERIAN PUBLIC                                                           $310
                                                                                                                  DEEP                 SUBPRIME                  NON                PRIME                           SUPER
                                                                                                                SUBPRIME                                        PRIME                                               PRIME

38   2018 N I A DA U S E D C A R I N D U S T RY R E P O R T
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