Car buyers borrowing more, paying off loans more reliably

Loan delinquency expected to slightly rise, remain low

George Ford
Published: December 20 2012 | 10:39 am - Updated: 1 April 2014 | 3:36 am in
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Americans are taking out larger loans to purchase cars and trucks, but they are paying their vehicles off reliably, pushing the national auto loan delinquency to near a record low.

Chicago-based TransUnion is forecasting that auto loan debt per borrower will continue to rise, jumping from an expected $13,689 in the fourth quarter of 2012 to $14,133 at the end of 2013. TransUnion believes auto financing will continue to grow as new and used car sales increase.

The national auto loan delinquency rate is expected to edge up from 0.36 percent at the end of 2012 to 0.37 percent by the end of next year, according to TransUnion’s national consumer credit data base. That represents more than a 50 percent drop from 0.86 percent, its peak in the fourth quarter of 2008.

TransUnion reported that 0.30 percent of Iowa borrowers were 60 days or more past due on their auto loans at the end of the third quarter on Sept. 30.

Montana at 0.13 percent is projected to have the lowest auto loan delinquency rate at the end of the fourth quarter. Mississippi at 0.88 percent is forecast to have the highest level of borrowers 60 days or more past due on their auto loans.

"The national auto loan delinquency rate should stay relatively low throughout 2013 as the economy continues to improve," said Peter Turek, automotive vice president in TransUnion's financial services business unit. "Factors such as the improving unemployment rate, median household income and housing prices are some of the primary drivers that lead us to a favorable forecast."

Turek said low auto loan delinquency rates have persisted even as more non-prime, higher-risk consumers are carrying auto loan balances. In the third quarter of this year, 20.66 million borrowers with a VantageScore credit score lower than 700 carried auto loan balances, up from 19.97 million borrowers with the same credit score in the third quarter of 2011.

"We believe this is happening partly because consumers are now valuing their auto loans even more than their credit card and mortgage loans," Turek said. "Lenders and dealers also are putting even more emphasis on placing buyers in vehicles and loans that best fit their financial situation."

TransUnion's loan delinquency and loan value forecasts are based on various economic assumptions, such as unemployment rates, consumer sentiment, disposable income and interest rates. The company has a credit database consisting of 27 million anonymous consumer records that are randomly sampled every quarter.

The most current auto loan delinquency data for the nation and every state can be found at www.transunion.com/trenddata.

 

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