Auto Finance Economic Insights: How Vehicle Information Informs Credit Risk Measures
Tony Hughes and Michael Vogan share valuable insights for managing your auto lending business more effectively.
In this presentation, we explore how vehicle choice can help predict probability of default, even after controlling for financial terms and borrower credit score. Our analysis suggests that vehicle information, including residual price forecasts, lifts the ability of traditional scores to classify borrowers from most likely to default to least likely. We combine data on consumer credit performance with vehicle information forecasts under a range of economic scenarios to answer:
- Can vehicle information help assess the creditworthiness of borrowers?
- What vehicle types are associated with better credit performance?
- How economically significant is vehicle information?
- How do borrowers act under stressed economic conditions?
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Tony Hughes | April 2018
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