Auto loan origination volume continues to increase despite affordability concerns overshadowing the industry, according to TransUnion’s Q4 2019 Industry Insights Report.
In fact, auto originations grew 4.3% year over year in the third quarter of 2019 to 7.5 million new accounts, the largest jump the credit reporting agency has recorded “in quite some time,” Matt Komos, vice president of U.S. research and consulting, told Auto Finance News.
“We keep seeing vehicle prices are on the rise. That gets reflected in new account balances, which is growing at a comparable rate to those vehicle prices,” Komos explained. “That’s where the concern about affordability comes up.”
Average balance on new auto loans rose to $22,232, up from $21,520 in the prior-year period. Yet, consumers are still gravitating toward more expensive vehicles, such as SUVs and trucks, despite rising vehicle prices.
“It’s kind of a tale of two stories happening,” Komos said. “We hear about affordability a lot, and I think it might be somewhat anecdotal because, from a behavior standpoint, we see that consumers are purchasing more expensive vehicles.”
According to TransUnion data, trucks and SUVs account for 70% of new financed vehicles and 60% of used vehicles.
Average loan terms continue to inch up, landing at 69 months in 3Q19, up from 68 months during the same time the previous year. Similarly, average LTVs also grew for both new and used vehicles, rising to 100.0 and 112.2, respectively. Last year, average new-vehicle LTV clocked in at 99.6, and used-vehicle LTV came in at 109.4.
Looking at performance, 60-plus day delinquencies are still pretty well managed, Komos said, increasing 6 basis points to 1.5%.
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