TransUnion: Late Auto Loans Decline in Q2

Auto loan delinquencies continued to shrink in the second quarter, outpacing expected seasonal declines, TransUnion LLC said Tuesday.

The national auto loan delinquency rate, which is tied to loans 60 or more days past due, fell to 0.44% in the second quarter, down 10.2% from the previous quarter and 16.98% from a year earlier.

While auto delinquencies typically decline in the first and second quarters, this was the seventh straight quarter of falling rates, Peter Turek, the automotive vice president in TransUnion's financial services business, said in a press release.

"We have seen delinquencies trend downward as consumers continue to pay down debt," Turek said. "With auto sales improving, more auto loans are opened by consumers placing downward pressure on auto delinquency rates."

The improved performance matches similar trends in credit card lending, where improvements in delinquencies and charge-offs have allowed banks to boost earnings by setting aside smaller amounts of funds to cover future losses.

Auto financing is also more affordable because of low interest rates for new and used car loans, Turek added. The average amount of outstanding bank auto debt consumers had in the second quarter was $12,689, up 0.83% from the first quarter and 0.37% from a year earlier.

"Auto loan delinquencies are expected to remain at historically low levels through the end of the year," Turek said. "Consumers should benefit in the form of competitive offers, making purchase decisions easier and more affordable."

Auto loan originations "held steady" in the second quarter at about $63 billion, more than 25% higher than their trough level in the first quarter of 2009, according to the Federal Reserve Bank of New York's Quarterly Report on Household Debt and Credit released this month.

"It's very clear that competition is returning pretty ferociously in that business," Richard Fairbank, the chairman and chief executive of Capital One Financial Corp., said of auto lending at an investor conference in June.

He added, "We see a lot of regional banks and other folks stepping up their commitment to the auto business."