Purely Quantitative Forecasts of Car Values that Fully Account for Cyclical Economic Factors Under Normal and Stressed Scenarios
The Challenge: Accurately Estimating Car Values in the Secondary Market
To manage risk in their auto portfolios effectively, 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.
The Solution: Quantitative Economic Forecasts of Car Values Under Scenarios
Moody’s Analytics AutoCycle™ solution quickly and accurately forecasts car values in the secondary market. The solution provides forecasts of car prices in both normal and stressed scenarios, and incorporates cyclical economic dynamics affecting the automotive industry. The purely quantitative model was built and is maintained by economists who have more than 20 years of experience forecasting business cycles and formulating credible stress scenarios.
Moody’s Analytics AutoCycle solution offers a quantitative, consistent, and documented methodology for incorporating economic factors into car price forecasts. Forecasts are driven by macro factors, and account for mileage and age. Our solution enables you to:
- Account for macroeconomic variables such as gasoline prices, supply and demand drivers, and seasonal effects.
- Evaluate plausible outcomes and mitigate risk by generating forecasts under normal and stressed scenarios.
- Run forecasts for large car portfolios of varying makes, models, mileage, years and features at an 11-digit VIN level.
- Evaluate sensitivity to differing economic environments by car segment.
- Accurately forecast and stress test car values
- Manage risk and capital more effectively
- Identify long-term influences on prices
- Create competitive advantage
- Challenge internal assumptions
- Challenge third-party models and traditional valuation approaches
- Evaluate and plan for adverse economic conditions
- Meet regulatory requirements with detailed and transparent model methodology
- Leverage Moody’s Analytics proven modeling and forecasting expertise
- Quantitative econometric forecast model
- Incorporates supply and demand drivers
- Captures seasonal effects
- Coverage of more than 31 million transactions
- Nearly 1,200 vehicles from 70 manufacturers
- 35 vehicle segments covering cars, SUVs, light trucks and exotics
- 28 body types like wagon, hatchback or coupe
- Vehicle color and features detailed to 11-digit VIN including: Body type, Doors, Engine type, Fuel type and Drive type
- Data segmented by region and sale type
- Coverage of more than 1,800 economic variables
- Forecasts and scenarios updated monthly
- Robust platform to run forecasts for thousands of varying makes by model, mileage, year, and features simultaneously
- Direct access to economists and highly trained relationship management team