MARKET UPDATE & ECONOMIC OUTLOOK

MARKET UPDATE & ECONOMIC OUTLOOK

Economic Expansion Accelerates For the Moment Growth surged in Q2 from average 2.1% pace over prior 14 quarters; best quarter since 2014 10.0 Real Gross Domestic Product (SAAR) % Growth by Quarter 8.0 6.0 4.0 4.10 2.0 0.0-2.0-4.0-6.0-8.0-10.0 Source: United States Bureau of Economic Analysis 2

Impressive Employment Growth and 3.9% Headline Unemployment July saw 157k jobs added; YTD Ave 215k vs. 182k average in 2017 and 195k average in 2016 600 Monthly Job Creation 18.0 Headline Unemployment % (U3) Unemployment Rates Underemployment Rate % (U6) 400 16.0 200 14.0 0-200 -400 Jan-00 Sep-00 May-01 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06 May-07 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Jan-18 12.0 10.0 8.0 6.0 7.5-600 4.0 2.0 3.9-800 -1000 0.0 Jan-00 Aug-00 Mar-01 Oct-01 May-02 Dec-02 Jul-03 Feb-04 Sep-04 Apr-05 Nov-05 Jun-06 Jan-07 Aug-07 Mar-08 Oct-08 May-09 Dec-09 Jul-10 Feb-11 Sep-11 Apr-12 Nov-12 Jun-13 Jan-14 Aug-14 Mar-15 Oct-15 May-16 Dec-16 Jul-17 Feb-18 Source: BLS 3

Consumer Confidence Remained Strong in July But Purchase Intention Waning Plans to purchase an auto were down 18% y/y in July; smoothed trend down 5% Consumer Confidence Index (Index 1985=100, SA) Plans to Buy Auto in 6 Months (% SA) Plans to Buy Auto (% 12 mo MA) 140.00 16.0 120.00 14.0 100.00 12.0 80.00 10.0 8.0 60.00 6.0 40.00 4.0 20.00 2.0 0.00 0.0 Source: The Conference Board, Moody s Analytics 4

Disposable Personal Income Has Outpaced Consumption with Lower Taxes Lower spending on interest payments boosted spending on goods and services but that trend is reversing (up 12% y/y) Personal Income and Spending Indexed to 2000 Income Taxes Disposable Income Interest Spending 250 200 150 100 50 0 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Source: US Bureau of Economic Analysis Personal Income and Consumption 5

Peak Auto Sales Were Supported by Easier Lending But Now Tighter Subprime lending had reached a post-recession peak in 2015 over 25% but now consistently trending lower Auto Loan Origination $ by Credit Score <620 620-659 660-719 720-759 760+ <620% $180.0 35.0% $160.0 30.0% $140.0 $120.0 25.0% Billions $100.0 $80.0 20.0% 15.0% $60.0 10.0% $40.0 $20.0 5.0% $0.0 04:Q1 04:Q2 04:Q3 04:Q4 05:Q1 05:Q2 05:Q3 05:Q4 06:Q1 06:Q2 06:Q3 06:Q4 07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2 11:Q3 11:Q4 12:Q1 12:Q2 12:Q3 12:Q4 13:Q1 13:Q2 13:Q3 13:Q4 14:Q1 14:Q2 14:Q3 14:Q4 15:Q1 15:Q2 15:Q3 15:Q4 16:Q1 16:Q2 16:Q3 16:Q4 17:Q1 17:Q2 17:Q3 17:Q4 18:Q1 0.0% Source: New York Federal Reserve Consumer Credit Panel/Equifax 6

Best Available Auto Rates Edging Up Again The discount rate is up 75 basis points while best available auto rates are up ~80 basis points year-over-year Interest Rates New Auto 60 Mo New Auto 48 Mo Used Auto 36 Mo US 10 Year Treasury Fed Discount Rate 9 8 7 6 5 % 4 3 2 1 0 Source: Bankrate.com, US Federal Reserve, Bloomberg 7

Payments Have Risen the Most on Leases, Used Payments the Least In July, average new lease payments were up 4.3% y/y while new finance payments were up 3.2% and used only 0.7% Average New Loan Payment Average New Lease Payment Average Used Payment $600 $550 $500 $534 $450 $474 $400 $408 $350 $300 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Source: Dealertrack 8

New Sales Move Up and Down Within Business Cycles A below fundamental demand turn in new vehicle sales usually caused by recession or credit event 20.00 18.00 Quarterly New Lt. Vehicle SAAR (Millions) 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 1980Q1 1980Q3 1981Q1 1981Q3 1982Q1 1982Q3 1983Q1 1983Q3 1984Q1 1984Q3 1985Q1 1985Q3 1986Q1 1986Q3 1987Q1 1987Q3 1988Q1 1988Q3 1989Q1 1989Q3 1990Q1 1990Q3 1991Q1 1991Q3 1992Q1 1992Q3 1993Q1 1993Q3 1994Q1 1994Q3 1995Q1 1995Q3 1996Q1 1996Q3 1997Q1 1997Q3 1998Q1 1998Q3 1999Q1 1999Q3 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 2018Q1 Source: BEA; Recessions (shaded) defined by NBER's Business Cycle Dating Committee 9

The New Vehicle Market Now In Relatively Healthier Position New Vehicle Days' Supply vs SAAR Days Supply SAAR 140 20.0 Days Supply 120 100 80 60 40 11.4 45 11.7 50 12.4 48 14.0 15.6 55 56 16.5 60 17.5 17.8 58 60 16.7 16.7 18.0 16.0 14.0 12.0 10.0 68 65 8.0 6.0 4.0 20 2.0 0 0.0 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Light Vehicle SAAR (millions) Source: Autodata Days Supply, United States Bureau of Economic Analysis New Lt. Vehicle SAAR 10

Shifting Consumer Preferences Not Reflected in Wholesale Market Volumes The SUV reigns supreme in new vehicle sales while cars still dominated the used car market New Vehicle Sales by Category CAR PICKUP SUV VAN Manheim Sales by Category CAR PICKUP SUV VAN 60% 60% 50% 47% 50% 51% 40% 40% 30% 32% 30% 33% 20% 20% 16% 10% 10% 11% 5% 6% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Motor Intelligence/Autodata, Manheim, Cox Automotive 11

The Industry Can t Sell What It Doesn t Have the Hole from 2009-2012 6 to 9 year old vehicles are outnumbered by 20 million and 10 million by younger and older cohorts, respectively LIGHT VEHICLES IN OPERATION AS OF APRIL 2018 ANNUALIZED USED SALES BY AGE OF VEHICLE Millions 20 18 16 Millions 12 11 10 Age MY 0-4 Age MY 5-8 Age MY 9-12 Age MY 13-16 Age MY 17+ 14 9 12 8 10 7 8 6 6 5 4 4 3 2 2 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Source: IHS Markit, Cox Automotive 12

Used Sales Have Reached a New Peak at 39.5 Million Annualized Rate Annualized used vehicle sales of 39.5 million in July, up 1% compared to last year Millions 40 39 38 37 36 35 34 33 Source: IHS Market Registrations and Cox Automotive Estimates 13

Manheim Used Vehicle Value Index at New Record Prices in July increased 1.51% versus June 2018 and were up 5.1% compared to July 2017 140 135 Manheim Used Vehicle Value Index (SA) 136.9 130 125 120 115 110 105 100 January 1995 = 100 95 90 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Source: Manheim 14

Percent Change in Wholesale Prices in July for Major Market Segments 35% 30% 1 year 2 years 3 years 4 years 25% 20% 15% 10% 7.2% 5% 5.1% 5.2% 3.3% 4.5% 3.4% 0% 0.2% -5% Industry Compact cars Midsize cars Luxury cars Pickups SUV/CUV Vans Source: Manheim 15

Three-Year-Old Vehicles Seeing Much Stronger Prices The spring bounce in 2018 moved prices higher relative to the start of the year; now seeing abnormal summer bounce 110.0% 3-Year-Old Model MMR Index by Week 105.0% 100.0% 95.0% 90.0% 85.0% 80.0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 2015 2016 2017 2018 Source: Manheim 16

Retention Values Have Been Trending Higher This Year Relative to Last Year Adjusting for MSRP and fixing the basket of vehicles by what was sold showing gains over last year and approaching 2016 63% 61% 59% 57% 55% 53% 51% 49% 47% CY 2016 CY 2017 CY 2018 (1 to 3 year old models) 45% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Kelley Blue Book 17

Q1: How would you describe the current market for vehicles in the areas where you operate? OVERALL SCORE 0 Weak 51 50 Average Q1 2018:49 100 Strong 56 50 FRANCHISE DEALERS Q1 2018: 55 INDEPENDENT DEALERS Q1 2018: 47 D E A L E R S E N T I M E N T I N D E X : Q 2 2 0 1 8 18

Q2: What do you expect the market for vehicles in your area to look like 3 months from now? OVERALL SCORE 56 Q1 2018:70 0 Weak 50 Average 100 Strong 69 52 FRANCHISE DEALERS Q1 2018: 73 INDEPENDENT DEALERS Q1 2018: 70 D E A L E R S E N T I M E N T I N D E X : Q 2 2 0 1 8 19

What are the top factors holding your business back? FRANCHISE DEALER RANK 1 Market Conditions 47% 2 Competition 36% 3 Credit Availability for Consumers 24% 3 OEM Mandates/Restrictions 24% 5 Limited Inventory 23% 5 Expenses 23% INDEPENDENT DEALER RANK 1 Market Conditions 42% 2 Limited Inventory 41% 3 Credit Availability for Consumers 40% 4 Expenses 26% 5 Competition 25% Source: Q1 Dealer Sentiment Research, March 2018, Cox Automotive 20

Auto Market Growth Is Plateauing With New Declining Marginally 2017 began the decline of New vehicle sales, in Fleet and Retail, but increase in Used more than offset the decline Vehicle Sales by Year and Type, Actual and Forecast 60.0 New - Retail New - Fleet Used 50.0 40.0 Millions 30.0 37.6 35.8 36.7 38.0 38.6 39.4 39.5 39.5 20.0 10.0 2.7 2.8 3.0 3.1 3.0 2.9 2.8 2.7 11.8 12.9 13.6 14.4 14.3 14.2 13.9 13.6 0.0 2012 2013 2014 2015 2016 2017 2018F 2019F Source: IHS Markit Registrations (history); Cox Automotive forecast 21

Growth in Maturities Continues But At Decelerating Pace 4.5 Estimated Lease Maturities 4.0 3.5 3.5 3.9 4.1 3.9 3.7 3.6 3.5 3.1 3.0 Million Units 2.5 2.0 2.2 2.5 1.5 1.0 0.5 0.0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Cox Automotive 22

Off-Lease Mix Changing to Fewer Cars and More CUVs 60.0% 5.0 4.0 50.0% 3.0 40.0% 2.0 30.0% 20.0% 10.0% 1.0 0.0-1.0-2.0-3.0 2017 2018 2019 2020 0.0% 2016 2017 2018 2019 2020 CAR CUV SUV PICKUP VAN -4.0-5.0 CAR CUV SUV PICKUP VAN Source: Cox Automotive, 2018 Used Car Market Report & Outlook 23

Wholesale Volumes Only Seeing Minor Growth Growth remains limited to off-lease while other sources are stable Million Units 18 16 14 12 10 8 6 4 14.5 1.1 1.3 1.6 Dealer Off Lease Rental Repo Factory/Fleet/Other* 15.4 0.8 1.5 1.7 16.1 16.2 16.5 0.9 0.9 0.9 1.5 1.5 1.5 1.7 1.7 1.7 2.5 3.1 3.5 3.9 4.1 8.4 8.6 8.7 8.7 8.7 2 0 2015 2016 2017 2018F 2019F Source: Cox Automotive 24

The US Market Is Heavily Dependent on a Global Supply Chain 35% Composition of New Vehicles Sold in the US by Major Segments and Major Countries of Origin 70% 30% 60% 25% 50% 20% 40% 15% 30% 10% 20% 5% 10% 0% VAN SUV MIDSIZE CAR LUXURY COMPACT CAR PICKUP CUV USA MEXICO CANADA JAPAN SOUTH KOREA GERMANY UK ITALY SWEDEN Import Share 0% Source: IHS Markit, Cox Automotive 25

Each Brand s Exposure To Tariffs Differs Based On Non-USA Production 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100% 99% 0% 1% 89% 11% 81% 19% 76% 24% 64% 64% 36% 36% 62% 38% 53% 53% 53% 47% 47% 47% 51% 49% 49% 51% 52% 48% 46% 54% 36% 64% 66% 67% 34% 33% 31% 69% 29% 71% 27% 73% 18% 82% 14% 86% 7% 93% 100% 0% ALFA ROMEO ASTON MARTIN AUDI BENTLEY FERRARI FIAT GENESIS JAGUAR LAMBORGHINI LAND ROVER LOTUS MASERATI MAZDA MCLAREN MINI PORSCHE ROLLS ROYCE SMARTCAR VOLVO Domestic Share Import Share Source: Cox Automotive estimates based on IHS Markit Registrations 26

Kentucky Shares More of the F Series Than Other Vehicles Produced in the State Source: Cox Automotive estimates based on IHS Markit Registrations 12 Months Ending May 2018 27

Kentucky Produced Vehicles Represent 6.6% of New Registered Vehicles Source: Cox Automotive estimates based on IHS Markit Registrations 12 Months Ending May 2018 28

Kentucky Produced Vehicles Represent 6.6% of New Registered Vehicles Source: Cox Automotive estimates based on IHS Markit Registrations 12 Months Ending May 2018 29

Kentucky Produced Vehicles Represent 6.6% of New Registered Vehicles Source: Cox Automotive estimates based on IHS Markit Registrations 12 Months Ending May 2018 30

Kentucky Produced Vehicles Represent 6.6% of New Registered Vehicles Source: Cox Automotive estimates based on IHS Markit Registrations 12 Months Ending May 2018 31

Kentucky Produced Vehicles Represent 6.6% of New Registered Vehicles Source: Cox Automotive estimates based on IHS Markit Registrations 12 Months Ending May 2018 32

Kentucky Auto Production Sales Demand Trend for Sedans Units Registered 12 mo ending May 2018 Source: Cox Automotive estimates based on IHS Markit Registrations 12 Months Ending May 2018 33

Kentucky Auto Production Sales Demand Trend for Trucks & Utilities Units Registered 12 mo ending May 2018 Source: Cox Automotive estimates based on IHS Markit Registrations 12 Months Ending May 2018 34

Kentucky Produced Vehicle Sales State Distribution 30% of US demand for KY vehicle production goes to 3 states (TX, CA, FL) Source: Cox Automotive estimates based on IHS Markit Registrations 12 Months Ending May 2018 35

Thank You Jonathan Smoke jonathan.smoke@coxautoinc.com