TransUnion expects auto loan delinquencies to remain stable through 2016, ending the year around 1.11%, unchanged from where they are estimated now for yearend 2015.
The stable forecast for the 60-plus-days delinquency rate reflects what credit bureau TransUnion called a “healthy equilibrium” is auto lending, and comes despite an increase in auto loans to customers with subprime credit, said Jason Laky, senior vice president and automotive business leader for TransUnion.
“In absolute terms, yes, lenders are making more subprime loans,” he told Auto Finance News in an interview. But in relative terms, subprime share is still below pre-recession highs, he said. “The percent of subprime as a part of the total is still much lower than it was,” Laky said.
In the third quarter, subprime loans accounted for 18.7% of outstanding auto loans, versus 23.7% in the third quarter of 2009, TransUnion said. The credit bureau defined subprime loans as credit scores of 600 or below, on the VantageScore 3.0 scale.
Laky said that at this time last year there were several potential threats to the U.S. economy and to auto lending that didn’t really fully materialize. A year ago, TransUnion said it expected 60-day auto delinquencies to increase to 1.27% as of the fourth quarter of 2015, up from around 1.20% for the fourth quarter of 2014.
“Last year there were all these plus-side aspects to auto sales, and a different set of economic variables that were supposedly going to trip us up. Oil prices falling were going to trip us up, China was going to trip us up. Yet consumers experienced healthy employment growth, low gas prices, low inflation, and modest but strengthening income growth,” Laky said.
For the current cycle, auto loan delinquencies peaked at 1.54% in the fourth quarter of 2009, according to Chicago-based TransUnion.
