The challenge: accurately estimating car values in the secondary market
To effectively manage risk in their auto portfolios, banks, captive finance, insurers, auto dealers, rental networks, and other firms, must account for future economic conditions. While firms estimate car prices using internal and third-party models that often include a degree of subjectivity, they do not fully account for cyclical economic factors. As a result, these approaches can produce inaccurate, inconsistent, or biased values that can affect estimations and stress testing programs. Moreover, stress testing has revealed a need for wholly model-driven projections. Rigorous back-testing and complete documentation are also mandatory.
Moody’s Analytics AutoCycle™ quickly and accurately forecasts car values in the secondary market. It forecasts car prices in both normal and stressed scenarios, and incorporates cyclical economic dynamics affecting the automotive industry. The purely quantitative model was built and maintained by economists who have more than 20 years of experience forecasting business cycles and formulating credible stress scenarios.