Auto Loan Delinquencies to Stay Low, Debt to Rise in ’13

As the economy continues to improve, borrowers 60 or more days past due will stay close to record-low levels next year, according to TransUnion’s annual national auto loan delinquency forecast, released today.

Despite the lows, the forecast predicts that auto debt per borrower will continue to rise in 2013, up to $14,133 in Q413 from the $13,689 TransUnion anticipates seeing at the end of this year.

Since reaching its peak of 0.86% in 4Q08, the national auto loan delinquency rate has dropped more than 50%, but it is expected to see a moderate increase to 0.37% from 0.36% year-over-year.

“Macroeconomic 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,” Peter Turek, automotive vice president in TransUnion’s financial services business unit, said in a press release.

Delinquencies will likely drop or stay flat in 17 states next year, while 21 are predicted to experience increases of 1 or 2 basis points. The largest decline percentages are expected in Georgia, California, and Alaska, and the largest increases in auto delinquencies are anticipated in Hawaii, Virginia, and Nevada. 

Despite a steady increase in nonprime and high-risk consumer auto loans, low auto loan delinquencies remained. TransUnion’s Industry Insights database found that, on a scale of 501 to 990, the number of borrowers with a credit score lower than 700 rose to 20.66 million in 3Q12 from 19.97 million in the same period in 2Q11.

“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. “Also, lenders and dealers are putting even more emphasis on placing buyers in vehicles and loans that best fit their financial situation.”

The total number of borrowers with auto loan balances rose to 61.68 million in the third quarter, up from 59.27 million in the same quarter last year. Auto loan debt also saw an increase to $13,571 per borrower from $12,902 in the same period. If TransUnion’s prediction is true, auto loan debt will have risen 11 consecutive quarters since the first quarter of 2011. In comparison to the 11 quarters prior to 1Q11, auto loan debt rose just three quarters.

Chicago-based TransUnion was founded in 1968. Its information and risk data is used by businesses and consumers in 33 countries worldwide.