The Federal Reserve Bank of New York’s Q1 U.S. household debt report finds auto loan and lease originations declined slightly year-over-year — except for sub-620 customers — while 90-day delinquencies grew by 9.2%.
Affordability remains a concern despite finance sources continuing to tighten underwriting standards, according to the firm. Consumers, however, seem unfazed, with outstanding balances climbing to a new record high.
The firm attributed the slowdown to improvements in oil states and tightening underwriting guidelines, which have also helped stabilize delinquency rates.
Originations continued to fall at a faster rate than previous years, as finance sources continued to tighten underwriting standards during 2017’s end-of-year quarter. TransUnion officials, however, say the sector is performing well as the economy remains relatively strong.
Credit scores in the fourth quarter of 2017 were only a half a point higher than the median score recorded during the first quarter of 2009. And according to the Federal Reserve Bank of New York, 2017 auto loan origination volume reached the highest level it has ever observed.
For the fourth consecutive quarter, auto loan originations in the second quarter decreased on a year-over-year basis. Much of that decline was driven a 5.9% decrease in subprime, nearprime, and prime loan originations.
The feat comes almost nine years after the Great Recession, when household debt reached $12.68 trillion. But the debt and its borrowers look quite different today, the New York Fed noted, and auto finance sources showed signs of tightening in response to some deterioration in auto loan performance.
Transunion projects the auto loan delinquency rate for consumers with payments 60 or more days past due to close the year at 1.4%, the highest level since year-end 2009. Even with this increase, TransUnion said delinquency rates will remain well below levels observed during the last recession.
CU Direct's credit union network was the No. 3 auto loan originator in the first quarter. However, the network posted the highest year-over-year growth in auto originations.
According to the American Bankers Association, indirect auto loan delinquencies were one of the categories to show a decrease, while delinquencies in the direct auto loan space showed an increase.
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