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 will explore questions such as: Can vehicle information help assess the creditworthiness of borrowers? What vehicle types are associated with better credit performance? How economically significant is vehicle information?
Takeaways- We can distill the underlying propensity of owners of different vehicles to default after a range of lender and borrower characteristics are carefully controlled.
- We suspect that this tendency to default measure may be an excellent new way to accurately assess customer satisfaction across vehicle brands.
- Default carries severe consequences for car owners. If stressed borrowers fight to keep their cars in the wake of financial difficulties, this is perhaps the strongest possible signal of esteem for a particular brand or for a particular vehicle segment
