Delinquencies on auto loans plunged in the first quarter, falling 17.8% nationwide, according to the latest analysis by TransUnion LLC. The share of auto loans on which payments were at least 60 days overdue fell to 0.65% in the first quarter from 0.79% in the final quarter of 2007, the credit information company found. "Historically, there is a decrease in 60-day auto loan delinquencies between the fourth and first quarters," TransUnion officials said. "However, the [nearly] 18% drop is the sharpest in four years."
The sharpest improvements compared with the fourth quarter were seen in Hawaii, where delinquencies fell 41.7% to 0.60% of all auto loans; Maryland, where they fell 32.9% to 0.53% of auto loans; and Rhode Island, where delinquencies fell to 0.57% in the first quarter from 0.84% in the fourth quarter.
Delinquency rates were lowest in North Dakota (0.30%), Montana (0.35%) and Wyoming (0.37%). "Even states that have the highest 60-day delinquency rates – like Louisiana [1.19%] and Alabama [1.07%] – have shown a decrease over the prior quarter," Peter Turek, automotive vice president in TransUnion's financial services group, said in a statement. "According to the IRS, individual income tax refunds were larger (up 3.5%) and consumers filed earlier than in the previous year," he noted. "It is plausible the tax refunds from the government are helping consumers with their debt burden."
Compared with the first quarter of 2007, "auto loan delinquency rates … remained essentially flat," TransUnion said, edging up to 0.65% nationwide from the year ago 0.64%.
Average auto debt nationwide rose 0.7% compared with the fourth quarter to $12,833 per borrower, in what the credit data company described as "another sign of a potentially better auto finance market." Compared with a year ago, auto debt rose 1.88%, or nearly $240 per borrower.
"The availability of home equity for financing auto purchases has diminished significantly in states like Nevada and Arizona, thus contributing to higher auto loan debt," TransUnion's Turek said. National mortgage debt per borrower edged up 0.29% in the first quarter to $191,917, or 5.38% above the year-ago level, the company found in a separate report last month.
Going forward, Turek added, "Our current forecasting models indicate that the national 60-day auto delinquency rate is expected to gradually rise from a value of 0.65% in the first quarter of 2008 to 0.75% by year end. This is not a material difference from the recent high of 0.79% in the fourth quarter of 2007, and the gradual increase might generally be attributed to seasonality effects in auto loan delinquency.
"However, we might see an as-yet unquantified reduction in auto loan delinquency, based on this 0.75% forecast," he said, "as the more-conservative underwriting standards and more-aggressive collections efforts on the part of many auto lenders gain momentum and begin to bear fruit."