Kenneth Shilson & Associates, PC dba Subprime Analytics 2180 North Loop W., Ste. 270

Houston, Texas 77018 (832) 767-4759

www.subanalytics.com

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BBEENNCCHHMMAARRKKSS//TTRREENNDDSS

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CCOONNTTRRIIBBUUTTOORRSS::

www.sgcaccounting.com www.ncm20.com

www.subanalytics.com www.niada.com

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Page(s) Year-End Review / Look Ahead (Shilson Commentary) Pages 1-3 Ratio Comparisons (from SGC) Page 4 Cost of Goods Sold and Operating Expense Detail (from SGC) Page 5 20 Group Dealer Operating Information (NCM/NIADA 20 Groups) Page 6 Loss Statistics (from Subprime Analytics) Pages 7 BHPH Industry Trends – Graphs Pages 8-11

NNOOTTEESS TTOO TTHHEESSEE BBEENNCCHHMMAARRKKSS

1) Financial information prepared from the best performing dealers in the SGC database of more than 500 dealers nationwide. The operating information represents a composite of BHPH Twenty Group participants from NCM and NIADA.

2) All ratio and financial information on pages 4-5 has been verified for

accuracy and comparability as to accounting policies and practices. 3) Financial results are combined (dealer and related finance affiliate), where

applicable. 4) Intercompany activity has been eliminated from financial information, as

applicable. 5) Financial information was provided by SGC Certified Public Accountants,

Houston, Texas.

6) Loss statistics were electronically determined by Subprime Analytics, who performed computerized portfolio analysis of approximately 2,000,000 subprime auto finance deals – aggregating nearly $20.0 billion – to identify loss rates and patterns.

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For 2017, The National Alliance of Buy Here, Pay Here Dealers (“NABD”) and Subprime Analytics, with the approval and participation of the National Independent Automobile Dealers Association (NIADA), prepared these industry benchmarks from a database of dealer/operators nationwide. The financial benchmarks included herein were prepared and contributed by SGC Certified Public Accountants (“SGC”). The financial information they used represents a composite of the “best performing” operators and not an average of the entire industry. These benchmarks also include operating information on sales, collections and recoveries, and inventory management, supplied by NCM and NIADA 20 Groups from composites of their BHPH members. Also included are portfolio performance metrics which were compiled electronically by Subprime Analytics (“Subprime”) which, to date, has analyzed approximately $20 billion (nearly 2.0 million deals) of subprime installment contracts to identify loss rates, patterns, and trends. In the aggregate, these statistics provide a comprehensive look at the financial and operating performance of the BHPH industry, and important trend information.

Effective January 1, 2018 NIADA purchased the assets and operations of NABD and merged the two organizations. Subprime Analytics has contracted to provide analytical services, including periodic benchmark data, to NIADA in the future to support important legal and regulatory positions for the used car industry. On June 18-21 NIADA and NABD will hold a combined used car conference in Orlando at Rosen Shingle Creek Resort, where we will discuss these benchmarks and trends to help operators understand the changing subprime auto finance market. For further information, visit www.bhphinfo.com or www.niada.com. Industry benchmark reports for the past five years can be downloaded free of charge at www.subanalytics.com.

2017 YEAR IN REVIEW!

The financial benchmarks for 2017 continue to reflect a high level of competition within the deep subprime market which began in 2013. The more significant factors that impacted deep subprime performance in 2017 were:

1) Unit sales were generally flat from 2016 volumes. However, operators increased sales prices and the related amounts financed in an attempt to maintain profitability. Absent corresponding increases in the down payments and repayments the terms of these originations were lengthened. Individual operators were affected by varying levels of competition in their local markets. Rural markets again were less competitive than major urban cities. A few operators added lots in an attempt to gain market share but their growth was restrained by capital availability. Experian automotive market data indicated a modest increase of only 0.4% in

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outstanding receivables for the BHPH industry in 2017 with larger increases in used financing shifting to captives and to credit unions. Wall Street auto securitizations of deep subprime paper slowed dramatically in 2017. Securitizations previously fueled significant growth in finance company portfolios during the last three years. Wall Street securitizers in 2017 tightened underwriting criteria and shifted their emphasis to prime and near prime customers as the year progressed.

2) Defaults on deep subprime auto bond securitizations in 2017 created a tightening of credit availability for subprime auto. Banks and other regulated capital providers implemented more stringent underwriting criteria and shifted to higher credit quality customers. Unregulated capital providers, like hedge funds and specialty finance companies, are entering the subprime financing market to supplement the capital needs.

3) Operators who did not increase the cost of vehicles they sold, lower their down payments, increase their sales prices and the corresponding amounts financed, enjoyed higher returns on their portfolio investments and stronger collection results.

4) Recovery values for repossessed vehicles which were not retailed stabilized in 2017, but remain more than 50% lower than realizations from a few years ago. This caused increases in net charge-offs and lowered the average recoveries expressed as a percentage of delinquency balances.

5) Financing rates which approximated 20% per annum have remained relatively consistent for the last three years in those states that do not have a mandated interest rate cap.

6) A comparison of the business models used by the independent operators surveyed, compared with those models used in deep subprime auto bond securitizations, indicated lower amounts financed, shorter terms, and lower average monthly payments by the independents.

7) “Cash in deal”, which measures portfolio risk, increased by approximately 12% when operators increased the average cost of the vehicles they sold.

8) Overall profitability improved slightly in 2017 due to higher financing income from new originations and reduced operating expenses from cost-cutting.

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WHAT’S AHEAD IN 2018?

Although 2017 was a challenging and competitive year, some new profit opportunities are ahead for independents in 2018 as follows:

1) Although capital availability for subprime auto will be tighter, competition from finance companies and captives will decline as they shift to higher credit quality customers. This creates an excellent opportunity for independents to regain market share if they have capital available to fund the growth.

2) Cash efficient business models will provide higher returns on portfolio investments and reduce portfolio risk.

3) Customer relationships are needed to regain and to retain the best subprime customers. Operators who proactively use social media to connect and collect with customers will do better. Advance tax refunds and irregular payments also help regain market share.

4) In order to control operating costs, implementing new technology to improve efficiencies is recommended. The biggest historical BHPH “game changers” have been pay portals (ACH, debit cards, etc.), GPS to improve recoveries and collections, and the use of related finance companies to reduce federal income taxes on “phantom income”. Texting is the next “game changer” to connect and to collect from subprime customers.

5) As Congress enacts changes at the CFPB, compliance still remains very important. The state Attorneys’ General will become the new enforcers as the CFPB transfers its enforcement power to them.

6) Competition for the best subprime customers has diluted their overall credit quality. Therefore, tighter scrutiny of customer stipulations will be needed to “keep subprime vehicles sold”.

7) While recovery rates stablized in 2017, further declines should be expected in later model inventory where off lease and off rental vehicles remain in abundant supply.

Operators must educate themselves on new market developments and market

changes, the newest technology, state regulatory enforcement actions, and capital market availability to prosper on the opportunities ahead. The best way to get started is to attend the NIADA/NABD Expo in Orlando on June 18-21.

BUY HERE, PAY HERE INDUSTRY BENCHMARKS / TRENDS 2017Prepared by SGC Certified Public Accountants

Ratio Comparisons: 2015 - 2017

2017 2016 2015Average BHPH Average BHPH Average BHPH

Benchmark Benchmark BenchmarkBalance Sheet

(Inventory x Days) / Cost of Vehicle Sales 50.54 days 53.21 days 53.44 days

Cost of Vehicle Sales /Average Inventory Dollars 7.02 x 6.89 x 6.73 x

Vehicle Sales / Average Inventory Dollars 11.72 x 11.39 x 11.55 x

Vehicle Sales / Total Assets 0.87 x 0.89 x 0.89 x

Total Assets / Total Liabilities 1.63 x 1.63 x 1.78 x

Allowance for Bad Debts / Finance Receivables* 28% 26% 24%

Total Debt / Total Assets 62% 62% 56%

* Finance receivables is principal before allowance for doubtful accounts.

2017 2016 2015Average BHPH Average BHPH Average BHPH

Benchmark Benchmark BenchmarkIncome Statement

Bad Debts / Vehicle Sales 30% 27% 25%

COMBINED BUY HERE / PAY HERE

COMBINED BUY HERE / PAY HERE

Cost of Vehicle Sales / Vehicle Sales 60% 61% 60%

Gross Profit*** / Vehicle Sales 29% 29% 31%

Operating Expense / Vehicle Sales 21% 23% 22%

Interest Expense / Financing Income 16% 18% 19%

Operating Income / Vehicle Sales 8% 6% 9%

Financing Income / Vehicle Sales 19% 17% 16%

Compensation** / Vehicle Sales 11.0% 12.0% 11.4%

Reconditioning Cost / Vehicle Sales 7.9% 8.4% 8.3%

NOTES TO RATIO COMPARISONS:**Compensation excludes those of the owners***Gross Profit is net of bad debts and financing incomex = times

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BUY HERE, PAY HERE INDUSTRY BENCHMARKS / TRENDS 2017Prepared by SGC Certified Public Accountants

Cost of Goods Sold and Operating Expense Detail: 2015- 2017

2017 2016 2015% of % of % of

Vehicle Vehicle VehicleSales Sales Sales

Cost of Vehicle Sales

Cost of vehicles 49.47% 49.24% 49.59%Reconditioning costs 7.87% 8.39% 8.31%Other 2.66% 3.13% 2.44%Total cost of vehicle sales 60.00% 60.76% 60.34%

Operating Expense

Advertising 3.53% 3.74% 3.93%Bank charges 0.17% 0.17% 0.18%Contributions 0.03% 0.03% 0.02%Depreciation 0.43% 0.49% 0.52%Dues and subscriptions 0.21% 0.15% 0.14%Insurance 0.39% 0.31% 0.32%Legal and accounting 0.22% 0.24% 0.28%Outside services 0.46% 0.79% 0.38%

Office expense 0.76% 0.79% 0.90%Rent 2.09% 2.28% 2.27%Repairs and maintenance 0.31% 0.15% 0.34%pSalaries (non-owners) 11.00% 11.97% 11.36%Taxes - general 0.12% 0.09% 0.07%Other operating expense 0.06% 0.16% 0.23%Taxes - payroll 0.50% 0.51% 0.52%Utilities and telephone 0.41% 0.59% 0.42%Travel / Training 0.31% 0.33% 0.38%Total operating expense 21.00% 22.79% 22.26%

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BUY HERE, PAY HERE INDUSTRY BENCHMARKS / TRENDS 2017Prepared by NCM and NIADA 20 Groups

20 Group Dealer Operating Information: 2016 - 2017

2017 2016 2017 2016

NIADA NIADA NCM NCM

Sales Benchmarks Benchmarks Benchmarks Benchmarks

Average units sold per dealer (BHPH deals only) 612 708 564 585

Average cash in deal per vehicle sold 5,922$ 6,466$ 5,663$ 5,656$

Average ACV per vehicle sold (includes recon) 6,838$ 7,438$ 6,137$ 6,034$

Average reconditioning cost per vehicle sold 824$ 811$ 1,051$ 1,126$

Average gross profit per vehicle sold 5,013$ 5,868$ 4,451$ 4,462$

Average cash down payment (including trades) 916$ 972$ 1,037$ 1,014$

Average amount financed 10,935$ 12,862$ 10,564$ 10,395$

Average term of loan (in weeks) 182 186 145 147

Collections / Recoveries

Average weekly payment amount 92$ 98$ 84$ 84$

Percentage of accounts past due 17.3% 17.9% 17.1% 18.7%

Average # of past due accounts per collector 88 94 100 87

Average net loss per charge off 5,393$ 6,807$ 5,726$ 5,098$

Average portfolio delinquency

Current 82.70% 82.10% 82.90% 81.30%

0-10 days N/A N/A 10.70% 12.00%

1-15 days 10.00% 10.50% N/A N/A

11-29 days N/A N/A 3.00% 3.60%

16-29 days 3.10% 3.60% N/A N/A

30-59 days 2.40% 2.30% 1.70% 1.70%

60-89 days 0.90% 0.80% 0.60% 0.60%

90+ days 0.90% 0.70% 1.10% 0.80%100.00% 100.00% 100.00% 100.00%

Inventory Management

Vehicle Days Supply (Units) 53 59 61 71

Average inventory aging

0-30 days 44.60% 48.70% 42.10% 44.00%

31-60 days 24.80% 23.50% 23.70% 23.50%

61-90 days 14.00% 14.30% 11.20% 11.40%

91+ days 16.60% 13.50% 23.00% 21.10%100.00% 100.00% 100.00% 100.00%

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BUY HERE, PAY HERE INDUSTRY BENCHMARKS / TRENDS 2017Prepared by Subprime Analytics

Loss Metrics - 2017

2017 2016 2015BHPH BHPH BHPH

Benchmarks Benchmarks BenchmarksLoss Metrics

Average gross dollar loss (before recoveries) 9,175$ 7,771$ 8,111$

Average net dollar loss (after recoveries) 7,034$ 5,916$ 6,061$

Average default rate (% of loans written off) 34.97% 33.96% 31.45%

Average gross dollar loss rate (% of principal) 40.66% 38.76% 37.35%

Average net dollar loss rate (% of principal) 29.29% 28.42% 27.91%

Average recovery (% of charge off recovered) 23.33% 23.87% 25.30%

Highest cumulative default month after origination 22nd Month 22nd Month 21st Month

Highest frequency of default (month after origination) 7th Month 7th Month 7th Month

Worst periodic loss month after origination February February February

Note: The above referenced loss data was determined by electronically analyzing approximately 2,000,000 loans, aggregating nearly $20.0 billion to identify loss rates and to understand why they occurred.

2180 North Loop West, Ste. 270Houston, TX 77018

PH 832-767-4759 - F 713-680-24747

BBHHPPHH IINNDDUUSSTTRRYY TTRREENNDDSS -- GGRRAAPPHHSS

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BHPH FINANCIAL TRENDS

Costs / Expenses: 2013 – 2017

60% 60% 60% 61% 60%

21% 22% 22% 23% 21%

0%

10%

20%

30%

40%

50%

60%

70%

2013 2014 2015 2016 2017

Costs / Expenses

Cost of Vehicles Operating Expenses Note: Percentages are expressed as a percentage of total sales.

Source: SGC Certified Public Accountants

BHPH FINANCIAL TRENDS Average Vehicle Cost, Down Payment, Cash In Deal: 2013 – 2017

$6,181

$7,150 $7,268

$6,397

$7,201

$5,294

$6,315 $6,484

$5,683 $6,400

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

2013 2014 2015 2016 2017

Average Vehicle Cost, Cash Down Payment, Cash in Deal

Average Vehicle Cost Average Down Payment Average Cash in Deal Source: Subprime Analytics

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BHPH FINANCIAL TRENDS

Bad Debts: 2013 - 2017

25%

26%

25%

27%

30%

22%23%24%25%26%27%28%29%30%31%

2013 2014 2015 2016 2017

Bad Debts

Note: Percentages are expressed as percentage of vehicle sales

Source: SGC Certified Public Accountants

BHPH FINANCIAL TRENDS Average Weekly Payment Amount: 2013 - 2017

$87

$89 $89

$88

$90

$85

$86

$87

$88

$89

$90

2013 2014 2015 2016 2017

Average Weekly Payment Amount 2013-2017

Source: Subprime Analytics

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BHPH FINANCIAL TRENDS Average Customer Down Payment: 2013– 2017

$887 $835 $784

$714 $801

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2013 2014 2015 2016 2017

Average Cash Down Payment 2013-2017 (Excluding Trades)(Includes Deferred Payments)

Source: Subprime Analytics

BHPH FINANCIAL TRENDS

Average Amount Financed: 2013 – 2017

$10,689 $10,765

$11,090 $11,015

$11,951

$10,000 $10,200 $10,400 $10,600 $10,800 $11,000 $11,200 $11,400 $11,600 $11,800 $12,000 $12,200

2013 2014 2015 2016 2017

Average Amount Financed

Average Amount Financed

Source: Subprime Analytics

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BHPH FINANCIAL TRENDS Average Original Term (Months)

39

40

42

43

44

36

37

38

39

40

41

42

43

44

45

2013 2014 2015 2016 2017

Mon

ths

Average Original Term (Months)

Source: Subprime Analytics

BHPH FINANCIAL TRENDS

Average Recovery Dollars Per Charge Off: 2013 – 2017

$2,971

$2,659

$2,050 $1,855

$2,141

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2013 2014 2015 2016 2017

Average Recovery Dollars Per Charge Off - 2013-2017

Source: Subprime Analytics