Auto loan balances are expected to continue to increase to more than $18,000 by the end of next year, according to TransUnion’s 2016 auto loan forecast released Monday.
The average auto loan debt per borrower this quarter is $17,985 and the estimate for the fourth quarter in 2016 is $18,509, according to TransUnion.
The company’s auto loan forecast released in December 2014 estimated the average balance for the end of this year would be $18,244, ACA International previously reported.
Its auto loan debt growth estimate for the end of 2016 is more than $1,000 over the past two years. “By the end of 2016, auto loan debt per borrower will grow more than $3,500 from Q4 2009, when the average balance was $14,956,” according to TransUnion.
The strong economy is contributing to the increasing balances and borrowing by consumers.
“With our stable, growing economy and the continued healthy pace of job growth, consumers are feeling confident enough to take on new auto loans, resulting in a healthy equilibrium between growing balances and low delinquency rates," said Jason Laky, senior vice president and automotive business leader for TransUnion, in a news release. “Robust consumer loan performance, combined with declining gas prices and low interest rates, will allow lenders to offer slightly larger auto loans to consumers in the coming year without putting their portfolios at risk.”
According to TransUnion, delinquency rates on auto loans will remain flat at 1.11 percent through the end of this year and 2016.
“For the last two years, auto delinquency has remained low as consumers prioritized their auto loan payments,” Laky said. “Through the end of 2016, we expect the auto delinquency rate to remain stable at historic, seasonal norms. We believe we have reached a ’new normal’ in auto delinquency and see no immediate cause for concern.”
The peak auto loan delinquency rate was 1.54 percent in fourth quarter 2009. Since then, delinquency rates have declined 28 percent, according to TransUnion.
In addition to increasing balances, the number of auto loans held by consumers has increased every quarter since the third quarter of 2011.
“In Q3 2015 (the most recent data available), the number of auto accounts grew to 69.4 million, up 8.2 percent from 64.2 million in Q3 2014. The number of auto loan accounts has grown 15 million from Q3 2011 to Q3 2015,” according to TransUnion.
“The data appear to refute the apprehensions about a subprime bubble-and may even point to an opportunity for growth in subprime auto lending,” Laky said. “While auto lenders are certainly extending loans and leases to consumers who present a higher risk, these consumers have been able to manage their auto loan obligations in line with expectations. As auto lenders incorporate trended data into their analyses, we may see even more consumers receiving auto loans as lenders more effectively underwrite previously unscorable consumers.”
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