National Auto Loan Delinquencies Continue to Decline

View this article at ACA International.

The national auto delinquency rate (the rate of borrowers 60 or more days past due) decreased on a year-over-year basis for the ninth consecutive quarter, dropping from 0.59 percent in Q4 2010 to 0.46 percent Q4 2011. On a quarter-over-quarter basis, auto delinquencies remained essentially flat compared to 0.47 percent in Q3 2011, according to TransUnion's ongoing series of quarterly analyses of credit-active U.S. consumers.

The end of 2011 was only the third time in the last 10 years that the U.S. did not experience a seasonal rise for the quarter.

"Normally there is a seasonal upswing in auto delinquency rates in the fourth quarter. Except in 2009 where there was no change and in 2003 where there was about a 4 percent drop, auto delinquency rates have shown upward movements between third and fourth quarters averaging in excess of 5 percent," said Peter Turek, automotive vice president in TransUnion's financial services business unit. "Ending the year flat is particularly interesting, because the number of new auto loans coming onto the books has consistently increased since the end of the recession, a primary driver of which has been an expansion in lending to consumers in the subprime market."

Between the third and fourth quarters of 2011, about half of the states experienced increases in their auto delinquency rates. On a more granular level, 44 percent of metropolitan statistical areas (MSA) saw increases in their delinquency rates last quarter. In comparison, 54 percent of MSAs experienced a rise in auto delinquency rates during the third quarter of 2011 and 40 percent did so in Q2 2011.

"National auto delinquency rates continue to remain at historic lows, and are likely to stay there as demand for both new and used vehicles continues to be strong," added Turek. "Even without a robust economic recovery, auto loan delinquencies have remained low, and we anticipate that an improving economy in 2012 will allow delinquencies to stay around their current levels."

TransUnion's forecast is based on various economic assumptions, such as unemployment rates, consumer sentiment, disposable income, and interest rates. The forecast changes as the economy deviates from a conservative economic forecast or if there are unanticipated shocks to the economy affecting recovery.