TransUnion Forecasts Higher Auto Loan Balances, Delinquencies in 2015
Dec 24th, 2014 @ 11:58 PM by Amber Nelson
Next year will be another good year for auto lending, according to predictions from credit agency TransUnion, with consumers borrowing more as the employment rate improves.
TransUnion forecasts that the average auto debt per customer in the 2014 fourth quarter will pan out to be $17,480. If auto debt reaches that mark it will be the 19th straight quarter of year-over-year growth. For next year’s fourth quarter, TransUnion believes average auto debt will rise to $18,244, up 4 percent from this year’s predicted gain.
“We expect the auto loan market to continue to perform exceptionally well in 2015, with more sales leading to continued increases in auto loan debt per borrower as the national portfolio gets younger on average,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit. “We anticipate the economy to continue to improve next year, with a better employment picture helping the auto industry.”
Car loan delinquencies have been historically low over the past year but are expected to rise slightly in 2015. The 60-day delinquency rate is expected to increase to 1.27 percent by in the 2015 fourth quarter. The prediction for this year’s fourth quarter is 4.20 percent. Last year TransUnion forecasted that the rate would be 1.19 percent this year, essentially hitting the bulls-eye. “We’re very pleased with the delinquency number,” Turek said.
And even though late payments will likely rise next year, it will be such a small gain as to not be a concern, according to TransUnion. “While the auto loan delinquency rate has slowly risen to a point where it will be above 2010 levels, we are still far off the peaks observed in 2008 and 2009 when delinquencies were more than 30 basis points higher,” Turek noted.
Part of what has helped keep the delinquency rate low is the credit-quality of the average buyer since the financial crisis. “The auto loan market has been especially strong for lenders, as much of the growth observed in the last few years has come from prime or better risk tiers,” said Turek. But he added that “there is room for growth in the subprime sector as evidenced by more competition. Prior to the recession the percent of subprime auto balances were nearly 5% higher than they are now.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.