1. “WHAT’S NEXT?” ANALYZING SUBPRIME AUTO FINANCE PRESENTATION TO TIADA Kenneth Shilson, President NABD www.bhphinfo.com Subprime Analytics www.subanalytics.com WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 1

2. BHPH MUST REGAIN LOST MARKET SHARE! WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 2

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14. HOW ARE DEEP SUBPRIME AUTO BONDS PERFORMING? WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 14

15. “Fitch points out that the subprime end of the market is where there’s increased competition to peddle loans. The ratings firm flagged an increase in loans to borrowers with NO Fico scores, lower down payments and extended term lending. No wonder there was a 34% RISE IN SUBPRIME LOAN LOSSES in February 2016!” CNN Money Article March 15, 2016 HOW ARE DEEP SUBPRIME AUTO BONDS PERFORMING? WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 15

16. HOW ARE DEEP SUBPRIME AUTO BONDS PERFORMING? “More borrowers with spotty credit are failing to make monthly car payments on time, a troubling sign for investors who have snapped up billions of dollars of securities backed by risky auto debt. Delinquencies on subprime auto loans packaged into bonds ROSE in January 2016 to 4.7%, a level not seen since 2010!” Bloomberg Markets Article February 23, 2016 WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 16

17. HOW ARE DEEP SUBPRIME AUTO BONDS PERFORMING? “Securities backed by auto loans are structured to absorb a portion of anticipated defaults, but concerns have mounted over the last year that cumulative losses on auto loan securitizations may end up exceeding initial estimates, thanks to declining underwriting standards.” Bloomberg News Article February 23, 2016 WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 17

18. OPPORTUNITY KNOCKS FROM AUTO BOND DEFAULTS! “More than 8.4% of (auto bond) borrowers with weak credit scores who took out loans in the first quarter of 2014 had missed payments by November, according to Moody’s analysis of Equifax credit-reporting data. That was the highest level since 2008!” David Stockman Contra Corner January 11, 2015 WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 18

19. “KEEPING THEM SOLD” IS ABOUT CUSTOMER RELATIONSHIPS NOT TRANSACTIONS! WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 19

20. WHAT CAN YOU DO TO COMPETE SUCCESSFULLY TODAY? WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 20

21. YOUR BUSINESS MODEL DICTATES YOUR SUCCESS! WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 21

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23. AVERAGE BHPH AMOUNT FINANCED Source: Subprime Analytics WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 23

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25. AVERAGE BHPH PAYMENT AMOUNT Source: NCM, Subprime Analytics WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 25

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27. AVERAGE BHPH ORIGINAL TERM (MONTHS) Source: Subprime Analytics WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 27

28. OPPORTUNITY KNOCKS! “The average purchaser finances around 90% of the price of the automobile, with the average loan size being around $11,000. Repayment is highly uncertain; more than half of these loans default, and the majority of these default within the first year of repayment.” National Bureau of Economic Research Study April 27, 2016 WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 28

29. HOW SOME BHPH OPERATORS ARE COMPETING SUCCESSFULLY! **Source: Subprime Analytics WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 29

30. BUSINESS MODELS WHICH GENERATED THE HIGHEST ROIS! **Source: Subprime Analytics WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 30

31. LOWERING DOWNPAYMENTS INCREASES YOUR RISK! WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 31

32. LOWERING DOWNPAYMENTS INCREASES YOUR CID! WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 32

33. LOWERING DOWNPAYMENTS INCREASES YOUR RISK! “NBRC estimates that, all else equal, extending a given buyer an additional $1,000 in credit increases the default rate on the loan by 15%. At the same time, a buyer who chooses to finance an extra $1,000 of the purchase (i.e. selects a larger loan) has an even greater default rate, around 24% higher than a buyer who opts to pay the $1,000 upfront (downpayment).” National Bureau of Economic Research Study April 27, 2016 WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 33

34. SUCCESSFUL BHPH OPERATORS REDUCE LEVERAGE NOT INCREASE IT! REDUCE LEVERAGE – DON’T INCREASE IT! WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 34

35. IS LEASING THE ANSWER? WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 35

36. IS LEASING THE ANSWER? WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 36

37. IS LEASING THE ANSWER? WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 37

40. QUESTIONS? KEN SHILSON, CPA WWW.SUBANALYTICS.COM 832-767-4759 WWW.KENSHILSON.COM THANK YOU! WWW.BHPHINFO.COM  WWW.SUBANALYTICS.COM 40