TransUnion: Average Auto Balances to Rise in 2016, Delinquencies to Remain Flat
TransUnion expects the average auto loan debt per borrower to increase to $18,509 by the end of 2016, a more than $3,500 increase since the Great Recession. The firm noted, however, that subprime auto loans still make up less than the 23.7% share recorded in the third quarter 2009.
CHICAGO — TransUnion issued its 2016 auto loan forecast this week. It projects stable delinquencies through 2016, with levels remaining flat at 1.11% between year-end 2015 and year-end 2016. Since they peaked in the fourth quarter 2009, the firm noted, delinquencies have declined 28%
While it expects delinquency rates to remain flat, the firm does expect average auto loan debt per borrower to increase from $17,985 in the fourth quarter 2015 to $18,509 in the fourth quarter 2016. At that level, the average will have grown more than $1,000 over the past two years and more than $3,500 since the fourth quarter 2009.
“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. “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.”
TransUnion also noted that the number of auto loans has grown every quarter since the third quarter 2011. In this year’s third quarter, the number of auto loans grew 8.2% from the year ago period to 69.4 million. Since the third quarter 2011, the number of auto loan accounts has grown by 15 million.
Despite the growth, however, fewer subprime consumers had an auto loan in the third quarter than in 2009, when subprime auto loans comprised 23.7%, or 14.8 million, of all loans. In the third quarter, the share of subprime loans accounted for 18.7% of the total, or 13.9 million consumers.
“The data appears to refute the apprehensions about a subprime bubble and may even point to an opportunity for growth in subprime auto lending,” said Laky. “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.”
On a state level, TransUnion expects delinquencies to rise in 27 states next year, with Hawaii (+8.68%), Oklahoma (7.06%) and Nebraska (+7.02%) expected to lead the way. Conversely, North Carolina (-6.05%), Florida (-5.85%), Kentucky (-5.15%) and Oregon (-4.16%) are projected to experience the largest declines in auto delinquencies.
TransUnion forecasts most states will experience stability or growth in average auto loan balances by the end of 2016. Hawaii (+7.99%), Idaho (+7.54%) and Maine (+5.07%) are expected to experience the largest balance increases, while the average balance in Michigan will decline $305 (-2.26%) and remain steady in Indiana.
Originally posted on F&I and Showroom
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