Auto loan debt per borrower increased for the 11th straight quarter, rising 4.4 percent from $16,060 in Q4 2012 to $16,769 in Q4 2013.
On a quarterly basis, auto loan debt also increased from $16,685 in Q3 2013.
The auto loan delinquency rate (the ratio of borrowers 60 days or more delinquent on their auto loans) increased to 1.14 percent in Q4 2013, up on both a quarterly and yearly basis (from 1.04 percent in Q3 2013 and 1.09 percent in Q4 2012). The delinquency rate remains below the Q4 average of 1.29 percent observed between 2007 and 2013.
The data provided are gathered from TransUnion's proprietary Industry Insights Report, a quarterly overview summarizing data, trends and perspectives on the U.S. consumer lending industry. The report is based on anonymized credit data from virtually every credit-active consumer in the U.S.
While we observed an uptick in auto loan delinquencies, there are reasons to believe they will continue to remain relatively low in the near future, said Pete Turek, vice president of automotive in TransUnions financial services business unit. First, while auto loan originations are increasing at a rapid pace, the percentage of non-prime accounts remains low. In fact, the percentage of non-prime borrowers for all auto loan accounts was lower in Q4 2013 than it was the previous year
The subprime delinquency rate (those consumers with a VantageScore 2.0 credit score lower than 641 on a scale of 501-990) increased from 5.73 percent in Q4 2012 to 6.12 percent in Q4 2013.
While this is nearly a 7 percent yearly increase, it should be noted that subprime delinquencies remain below levels we observed during the recession, said Turek.
TransUnion recorded 60.5 million auto loan accounts as of Q4 2013, up from 57.0 million in Q4 2012. Viewed one quarter in arrears (to ensure all accounts are included in the data), new account originations increased to 6.64 million in Q3 2013, up from 5.99 million in Q3 2012.
The share of non-prime, higher risk loan originations (with a VantageScore 2.0 credit score lower than 700) grew by 16 basis points (from 32.37 percent in Q3 2012 to 32.53 percent in Q3 2013). This percentage is still much lower than what was observed pre-recession (36.97 percent in Q3 2007).
We expect share of non-prime, higher risk loan originations to continue trending upward due to the growth of competitors in this segment, Turek said.
Only 14 states experienced either a decline or had their auto loan delinquency rates remain flat between Q4 2012 and Q4 2013. The largest delinquency declines occurred in Oregon, New Jersey and Delaware. The largest increases occurred in Michigan, Alaska and Arkansas. Auto loan balances rose in every state between Q4 2012 and Q4 2013.
TransUnion is forecasting auto loan delinquencies to drop in Q1 2014 to 1.02 percent because of historic seasonality associated with auto financing.
Auto delinquencies tend to drop in the first quarter of the year, and we expect current market conditions will place downward pressure on delinquencies, said Turek.
TransUnions forecast is based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates, real personal income and others. The forecast would change if there were unanticipated shocks to the economy.