Consumer Automotive Financial Services in the USA Series prospectus April 2014 1
Prospectus contents Page What is the research? What methodology has been used? How do dealerships surveyed break down? Which manufacturer brands have been investigated? What is the structure (of the overview report)? What are the key features of the research? How can the research be used? How can the PartnerBASE be used? Who can use the research? What are some of the key findings? What is the cost and format? How can the research be purchased? 3 4 5 6 7 8 9 10 11 12-15 16 17 2
What is the research? This series of reports is about the market for and provision of a range of financial services namely finance and leasing, vehicle service contracts (sometimes termed extended warranties), GAP protection, prepaid maintenance, tire and wheel protection (also known as road hazard protection), minor damage protection (also known as 'dent and ding' protection), road assistance, creditor insurance, excess wear and tear protection (for leased cars) and motor insurance to individual buyers of new and used passenger cars in the US. Collectively, these are often referred to as 'F&I' products. Together, the studies draw on a survey of 250 leading car dealerships, of which almost one fifth are specialist used car dealers, as well as an analysis of the national approach to consumer automotive financial services of 40 car manufacturer brands in the US. The PartnerBASE datasets that accompany the reports detail each of the marketing initiatives for consumer automotive financial services traced by Finaccord for both dealers and manufacturers; market data annexes are also available in a convenient spreadsheet format so that there is no need to re-enter key data points from the reports. Together, the reports and datasets will provide you with the definitive guide to current and future opportunities in consumer automotive financial services in the US. 3
What methodology has been used? Finaccord s survey of 250 dealerships in the US was carried out between December 2013 and February 2014. The research embraces the following information: whether automotive financial services are marketed to purchasers of new and used vehicles; if so, how many providers are used? if so, what are the identities of the providers used? if so, how do these differ between tied providers and non-tied suppliers? if so, what are the average take-up rates for buyers of new and used cars? The results of this research provide unique data for dealer provision rates, operating models, provider share of partnerships, and both average and overall customer take-up rates for dealer-intermediated finance and leasing, vehicle service contracts, GAP protection, prepaid maintenance, tire and wheel protection, minor damage protection, road assistance, creditor insurance, excess wear and tear protection, and motor insurance. Moreover, Finaccord s survey of 40 manufacturer brands pinpoints programs organised by manufacturers for the same products, identifying the extent to which these are offered through captive entities or in association with external partners. 4
How do dealerships surveyed break down? West, 55 Midwest, 55 Multi-marque, 81 GM, 34 Ford, 32 South, 85 Northeast, 55 Other groups, 18 BMW, 5 Hyundai, 6 Renault Nissan, 11 Finaccord s universe of dealerships includes 250 respondents in total spread across four regions of the US including manufacturer-owned dealerships, franchised dealerships, multi-marque dealerships and new and used car supermarkets. For a full list of the organisations contacted for the research and included in PartnerBASE, please contact Finaccord. Fiat Chrysler, 17 Honda, 18 Toyota, 28 5
Which manufacturer brands have been investigated? Acura Ferrari Lamborghini Nissan Aston Martin Fiat Land Rover Porsche Audi Ford Lexus Rolls-Royce Bentley GMC Lincoln Scion BMW Honda Lotus Smart Buick Hyundai Maserati Subaru Cadillac Infiniti Mazda Tesla Chevrolet Jaguar Mercedes-Benz Toyota Chrysler Jeep MINI Volkswagen Dodge Kia Mitsubishi Volvo 6
What is the structure (of the overview report)? 0. Executive Summary: providing a concise evaluation of the principal findings of the report. 1. Introduction: offering a rationale, a detailed description of methodology and definitions. 2. National Overview: including an overview of the markets for providing finance and leasing, vehicle service contracts, GAP protection, prepaid maintenance, tire and wheel protection, minor damage protection, road assistance, creditor insurance, excess wear and tear protection and motor insurance in conjunction with the purchase of new and used cars. Analyses include: comparisons of the size and segmentation of 'F&I' product markets; dealer provision rates, operating models and competitor dynamics; and average customer attachment rates at the point of sale. 3. Midwest Region: comprising an analysis of the market for consumer automotive financial services including: an overview of sales of new and used passenger cars; size, segmentation and growth of automotive finance and leasing; revenues from ancillary financial services; dealer survey results including analysis of the balance between manufacturer-branded / tied and independent / non-tied providers; and manufacturer survey results, including operating models and provider share of partnerships, weighted by brand sales, for manufacturer-branded programs. 4-6: Northeast Region, Southern Region, Western Region (for all, contents as for Midwest). 7
What are the key features of the research? Key features of this report include: coverage of the ten distinct sectors within consumer automotive financial services in the US, namely finance and leasing, vehicle service contracts, GAP protection, prepaid maintenance, tire and wheel protection, minor damage protection, road assistance, creditor insurance, excess wear and tear protection and motor insurance; provision of hitherto unpublished market size and segmentation data for each of these markets generated from Finaccord s proprietary US Automotive Financial Services Model; clear analysis of the US market for consumer finance and leasing services related to new and used car sales by distribution channel, differentiating between the point of sale and direct lenders; presentation of unique data from the survey of dealerships illustrating average customer take-up rates for consumer automotive financial services at the point of sale; identification of the partners used for consumer automotive financial services by both dealerships and manufacturers in the US, with contextual commentary concerning key competitors. 8
How can the research be used? You may be able to use this report and the PartnerBASE that accompanies it in one or more of the following ways: understand how the total market for consumer automotive financial services related to purchase of new and used passenger cars fits together in the US as a whole and across four key regions; appreciate the magnitude of the opportunity in consumer automotive financial services and how this breaks down by both product and distribution channel; identify key opportunities and gaps in the US market - what automotive financial services are customers most likely to buy and to what extent are their preferences served by dealers and manufacturer brands? adjust your own company s strategy in accordance with this analysis; evaluate the partnership strategy of your organisation and how it can secure a higher share of the market for consumer automotive financial services in the US by re-evaluating its approach to distribution alliances with dealer groups and manufacturers. 9
How can the PartnerBASE be used? Select product Identify product partners Brand Group Country Product type Product Operating model offered? Non-tied partner(s) Acura Honda USA Road assistance Yes External assistance provider Cross Country Motor Club (Agero) Aston Martin Aston Martin USA Road assistance Yes External assistance provider Cross Country Motor Club (Agero) Audi VW USA Road assistance Yes External assistance provider Road America Bentley VW USA Road assistance Yes External assistance provider Cross Country Motor Club (Agero) BMW BMW USA Road assistance Yes External assistance provider Signature Motor Club Buick GM USA Road assistance Yes Internal provider + external assistance provider OnStar, GM Motor Club (National General Insurance / Allstate) Look up specific brands Choose operating model Note: for this report, PartnerBASE also covers 250 dealerships. Finaccord Ltd., 2014 Web: www.finaccord.com. E-mail: info@finaccord.com 10
Who can use the research? 1. Automotive manufacturers: this research provides a wealth of unique and valuable benchmarking data allowing you to assess objectively your performance in consumer automotive financial services in the US and to counter the threat from non-captive competitors; 2. Finance and leasing providers: what are the opportunities to increase or build market share of consumer automotive finance and leasing for consumers in the US in both the point-of-sale and direct lending channels? 3. Insurance, warranty and assistance firms: according to the research, the total value of revenues generated by these products was approximately USD 28.53 billion for 2013 (including new business for that year plus revenue from in-force policies) but how does this market value segment by product type and by region? 4. Management consultancies: are you helping a manufacturer, finance / leasing provider, insurer, warranty company or assistance firm with its strategy or evaluating how it can develop its business in consumer automotive financial services? Understand the current status of US automotive financial services, saving time and effort on researching the subject yourself. 11
What are some of the key findings? 1. In the Southern region, new and used cars financed at the point of sale substantially outnumber those financed via direct lending New / used passenger car sales (millions) 25 20 15 10 5 0 2009 2010 2011 2012 2013 New / used cash only Used direct lending New direct lending Used point-of-sale New point-of-sale Source: Finaccord US Automotive Financial Services Model Finaccord Ltd., 2014 Web: www.finaccord.com. E-mail: info@finaccord.com 12
What are some of the key findings? (cont.) 2. In the Midwest region, the percentage of manufacturer brands offering particular automotive financial services outstrips the equivalent percentage for dealers for all products other than creditor insurance and minor damage protection Finance and leasing Vehicle service contracts GAP protection Prepaid maintenance Tire and wheel protection Minor damage protection Road assistance Creditor insurance Excess wear and tear protection Motor insurance 98.2% 100.0% 87.3% 95.2% 85.5% 85.8% 76.4% 98.7% 78.2% 79.3% 65.5% 48.9% 83.6% 100.0% 30.9% 14.7% 65.5% 77.8% 5.5% 52.5% Dealers Manufacturer brands (weighted by new car sales) 0% 20% 40% 60% 80% 100% Proportion of entities offering each type of automotive financial for new and / or used cars, 2013 Source: Finaccord US Automotive Financial Services Survey Finaccord Ltd., 2014 Web: www.finaccord.com. E-mail: info@finaccord.com 13
What are some of the key findings? (cont.) 3. Most dealers in the US offer tire and wheel protection, with two companies owned by JM Family Enterprises used frequently as non-tied providers in this context % of dealers offering tire and wheel protection and operating model 100% 80% Undisclosed 60% Both 40% Dealer (non-tied) Manufacturer / importer 20% other, 42.9% Non-tied provider share of partnerships, % JM&A Group, 9.0% Zurich, 8.9% Fidelity Warranty Services, 8.4% Competitor 4, 7.3% 0% Product offered Operating model (see legend) Competitor 8, 4.3% Competitor 5, 7.2% Competitor 6, Competitor 7, 6.0% 6.0% Note in the analysis of non-tied provider share of partnerships, competitors 4 to 8 are identified in the actual report Source: Finaccord US Automotive Financial Services Survey 14
What are some of the key findings? (cont.) 4. Key findings from the executive summary include: the value of gross advances and assets leased reached approximately USD 212.40 billion in 2013 for new cars, equating to a compound annual growth rate of 13.5% compared to 2009, while the same metric for used cars is estimated at USD 257.86 billion for 2013, up at an annual rate of 9.2% from 2009; viewed on a nationwide basis, Finaccord's analysis finds that Santander Consumer USA's deal with Chrysler group can place it among the market leaders for point-of-sale finance and leasing, with Ford and Toyota as the leading players in vehicle service contracts, and JM Family Enterprises and Allstate as the most prominent competitors in GAP protection; the value of new business from additional insurance, warranty and assistance products amounted to 3.6% of the underlying value of all cars sold by dealers to private customers in 2013, a figure that is high in comparison to most other countries around the world and that is due, in part, to substantial investment made in point-of-sale 'F&I' technology and training in the US. 15
What is the cost and format? Consumer Automotive Financial Services in the USA is available as a standard PDF document. The PartnerBASE dataset and market data annexe that accompany it at no further charge are in Excel format. Costs for this overview report, the four regional titles and other studies on the same subject in other major markets in the Americas are as follows: Consumer Automotive Financial Services in the USA GBP 1,995 Consumer Automotive Financial Services in the USA - Midwest Region GBP 795 Consumer Automotive Financial Services in the USA - Northeast Region GBP 795 Consumer Automotive Financial Services in the USA - Southern Region GBP 795 Consumer Automotive Financial Services in the USA - Western Region GBP 795 Consumer Automotive Financial Services in Argentina GBP 795 Consumer Automotive Financial Services in Brazil GBP 795 Consumer Automotive Financial Services in Canada GBP 795 Consumer Automotive Financial Services in Chile GBP 595 Consumer Automotive Financial Services in Colombia GBP 595 Consumer Automotive Financial Services in Mexico GBP 795 Consumer Automotive Financial Services in Peru GBP 595 Note: For UK-based clients, VAT at the prevailing rate will be added to the basic price. Costs quoted are for a single site user licence only. For a corporate user licence, please see the next slide for further details. Invoices can be paid in EUR or USD, at the prevailing exchange rate, if preferred. Prices shown for the studies about Argentina, Brazil and Mexico are for the 2014 updates due in Q3 / Q4 2014; the original 2012 reports cost GBP 595. 16
How can the research be purchased? Simple. Just go to the relevant area of the Finaccord web site available at www.finaccord.com/order_consumer-automotive-financial-services_country-reports.htm and fill in the online order form, clearly indicating: report required type of corporate user licence, if required * billing name address and e-mail address purchase order number, if applicable Please allow up to one working day for the delivery of electronic copy by e-mail. * For the corporate user licence please choose one of the following options: 1. One office, one country: no supplement over and above basic cost of reports ordered 2. Multiple offices, one country: additional 20% over and above basic cost of reports ordered 3. Multiple offices, two to ten countries: additional 50% over and above basic cost of reports ordered 4. Global (unlimited offices in unlimited countries): additional 100% over and above basic cost of reports ordered VAT at the prevailing rate will be added to the price of any corporate user licence acquired by UK-based buyers. 17