The national auto loan delinquency rate of 0.41% for the fourth quarter ended Dec. 31 remained at near historic low levels, according to TransUnion.
While the delinquency rate (the ratio of borrowers 60 or more days past due) was up from 0.38% for the third quarter, it has dropped five basis points from the end of 2011 when the rate was 0.46%.
Bank auto debt per borrower continued a recent trend, rising for the seventh straight quarter to $13,747 for the fourth quarter compared with $13,045 in the year-ago period.
“As expected auto loan delinquencies rose slightly in the fourth quarter, though they remain near the all-time record low set in the second quarter of 2012,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit. “We continue to see increasing auto debt per borrower as the new and used car sales market remains relatively strong."
Between Q3 2012 and Q4 2012, more than half of states (28) experienced increases in their auto delinquency rates. However, on a year-over-year basis only 14 states experienced increases in their auto delinquency rates. On a more granular level, 52.5% of metropolitan areas saw decreases in their auto delinquency rates between Q4 2011 and Q4 2012.
TransUnion’s analysis also found that auto loan originations continue to increase. Total new auto loan and lease originations in Q3 2012 grew by approximately 15.8% relative to the same period last year. Auto loan originations are analyzed one quarter in arrears, to account for the reporting lag of new accounts.
The share of non-prime, higher-risk consumers (with a VantageScore credit score lower than 700 on a scale of 501-990) was 32.4%. This is somewhat higher than one year ago (30.6% in Q3 2011), and is significantly higher than the 27.6% observed in Q3 2010. In volume terms, the number of new accounts originated to non-prime consumers increased 20.5% in Q3 2012 compared to Q3 2011. In addition, average balances for the newly originated auto loans increased by 1.66% in Q3 2012 relative to the same period last year, from $18,028 in Q3 2011 to $18,326 in Q3 2012.
“We’ve been observing an increase in sub-prime borrowers in the auto loan space now for several quarters and we do expect this will eventually push the overall delinquency numbers higher,” said Turek. “New loan originations are growing and that has helped the 60 day or more delinquency rate remain low, and we forecast that delinquencies will remain about the same in the first quarter, possibly even dropping slightly.”
TransUnion’s forecast is based on various economic assumptions, such as unemployment rates, consumer sentiment, disposable income, and interest rates. The forecast changes as the economy deviates from a conservative forecast or if there are unanticipated shocks to the economy affecting recovery.