TransUnions annual auto loan forecast calls for auto loan debt to continue to rise to $18,244 at the end of 2015. This would mark 19 consecutive quarters of increases.
The TransUnion forecast calls for the national auto loan delinquency rate (the ratio of borrowers 60 or more days past due) to increase slightly from an estimated 1.20% at the conclusion of 2014 to 1.27% at the end of 2015.
We expect the auto loan market to continue to perform exceptionally well in 2015 with more sales leading to continued increases in auto loan debt per borrower, said Peter Turek, automotive vice president in TransUnions financial services business unit. While the auto loan delinquency rate has slowly risen to a point where it will be above 2010 levels, we are still far off the peaks observed in 2008 and 2009 when delinquencies were more than 30 basis points higher.
Since Q1 2011, when auto loan debt per borrower totaled $14,954, borrowers are expected to increase their auto loan debt burdens by more than $3,000.
Since 2007, the auto loan delinquency rate has been as low as 0.86% in Q2 2012 and as high as 1.59% in Q4 2008. On average, the delinquency rate during the fourth quarter between 2007 and 2013 was 1.29%.
While delinquency levels for subprime borrowers have grown from 4.2% in in Q3 2012 to 4.5% in Q3 2013 to 5.3% in Q4 2013, the impact on the overall delinquency has been muted because their share has remained between 14% and 15% during this entire timeframe. TransUnion data also show the number of subprime borrower accounts are 1.6 million fewer in Q3 2014 versus Q3 2007 (pre-recession). Meanwhile the number of auto loan accounts rose approximately 4 million comparing Q3 2007 to Q3 2014.
"The auto loan market has been especially strong for lenders as much of the growth observed in the last few years has come from prime or better risk tiers," said Turek. "There is room for growth in the subprime sector, but lenders are taking a wait and see approach as demand for auto loans has been at elevated levels for the last few years."
In fact since Q3 2009 auto loan balances have increased from $700 billion to just over $900 billion, yet the subprime share of balances has dropped during the same time period from a high of just over 22% to 15%.
On a state level, auto loan delinquency rates are expected to rise in 38 states with the largest increases occurring in Rhode Island (+11%), Colorado (+11%), Utah (+9%) and Florida (+7%). The biggest percentage declines are expected in Alaska (-5%), Wyoming (-3%) and Maryland (-2%). Auto loan debt is expected to rise in every state and the District of Columbia with largest increases occurring in Michigan (+8%), Missouri (+7%), Georgia (+6%) and Arizona (+6%).
TransUnions forecasts are based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates and real estate values. The forecasts would change if there are unanticipated shocks to the global economy.
TransUnions Industry Insights Report
The data provided are gathered from TransUnion's proprietary Industry Insights Report (IIR), 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.