Buying patterns, pent-up demand, and competition can all affect where auto finance is headed in the year to come, but so far, things are looking pretty good.
“There’s a very attractive nature to the landscape, as auto sales in general are expecting growth,” Peter Turek, automotive vice president in TransUnion’s financial services business unit, told AutoFinanceNews.net. “Other segments don’t have the same certainty.”
In its annual national auto delinquency forecast, TransUnion predicts that the ratio of borrowers 60 or more days past due will remain the same between the end of 2011 and 2012. Sixty-day auto loan delinquencies are expected to decrease in the first two quarters of 2012 before rising back to 0.51% by yearend, finishing at the same rate as at yearend 2011.
The “predictability” and “stability” of the low delinquency forecast “gives lenders confidence,” Turek said.
Auto loan delinquencies have decreased markedly since peaking during the recession at 0.86% in the fourth quarter of 2008. Since that time, 60-day auto loan delinquencies have dropped on a year-over-year basis to 0.81% in 4Q09, 0.59% in 4Q10, and now to the expected 0.51% level for the ends of 2011 and 2012, the company reports.
Auto loan originations are also looking good, and financing related to auto sales is forecast to continue increasing into 2012, Turek noted. “Those two factors are going to put more competitive pressure on lenders,” he said. “I think 2012 is going to be good for lenders, dealers, and consumers,” he said. Originations have increased since the end of the recession in 2Q09, moving up nearly 28% as of 2Q11 (latest data available). Quarterly originations are nearly 41% higher than the lowest levels observed during the recession in 4Q08, having risen 8.4% in the past year.
Delinquency rates on a state-by-state basis are also performing well. “Every state, even the states hit hardest [by the crisis] are really doing well in terms of managing their debt,” Turek said.
According to TransUnion’s findings, 21 states are expected to see delinquencies drop by the end of 2012, while 29 states should experience increases. The largest yearly percentage auto delinquency declines are expected in Michigan (-14.54%), Rhode Island (-14.22%), and North Carolina (-14.54%). The largest percentage increases are expected in North Dakota (72.47%), Alaska (25.43%), and Iowa (21.06%). Despite the large percentage increase in North Dakota’s auto delinquency rate, the state is still expected to have the lowest level in the nation at 0.16%.
Practices that lenders put in place during the recession to avoid losses and delinquencies have proven to be beneficial for the industry. “Lenders and dealers have done a great job at putting consumers in the right vehicle with the right terms,” he said. “We expect that would continue.”
With hopes the forecast will hold true, Turek acknowledged the realistic possibilities.
“A lot of factors can impact the forecast,” he said, listing unemployment and consumer sentiment as possible influencers. “Barring a major shock, we expect the forecast to hold true. We might even see a slight improvement.”
