No Sign of Looser Auto Lending in 2010
Dec 16th, 2009 @ 10:25 PM by Amber Nelson
The latest forecast about auto loans points to rising delinquency rates by the end of next year, a sign that lenders are likely to remain stingy with their loans for some time. Credit information collector TransUnion says that the delinquency rate (borrowers that are 60 days late or more on their auto loans) is expected to reach 0.86 percent by the end of 2009, but will probably rise to 0.92 percent at the end of 2010.
“Our forecast indicates we will see auto loan delinquencies drop in the first and second quarters of 2010 due to many factors such as ‘Cash for Clunkers’ and tightening lending standards,” said Peter Turek, automotive vice president in TransUnion’s financial services group. “Delinquencies will rise in the second half of 2010 as economic pressures, along with traditional spending patterns of summer vacations, back to school and the holidays, will continue to strain consumers. While the rate of increase should be relatively mild, it is a cautionary number to those expecting an abrupt turnaround in the auto finance industry.”
If the predictions do come true, 2010 will be the fifth consecutive year of delinquencies either remaining unchanged or rising.
Broken down among the states, California is the only one expected to see a decline in its late auto loan rate, falling from 1.4 percent in 2009 to 1.35 percent next year. California has traditionally been an economic trend setter so as Turek says, “It’s a good sign that delinquency could start improving leaving 2010 and going into 2011.”
The states predicted to see the worst rise in delinquency rates are Mississippi, Georgia, and Alabama.
Auto credit is likely to be in short supply next year, as delinquent loans increase, making them riskier and less attractive to lenders. This may require some lifestyle changes on the part of consumers, like contributing larger down payments or simply settling for inexpensive models for a couple years.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.