Delinquency Gap Narrows

The auto loan delinquency rate climbed 8 basis points last quarter to 0.81%, but loan performance appears to have stabilized since lenders implemented stricter underwriting criteria in 2008.

The 60-day delinquency data was compiled by credit bureau TransUnion from a random sampling of 27 million individual credit files.

TransUnion expects fourth-quarter delinquencies to increase to nearly 0.9%, compared with 0.86% at yearend 2008. The uptick, though, is likely attributable to seasonal trends, said Peter Turek, automotive vice president in TransUnion’s financial services group.

What does this all mean? In my mind, we’re in for lower delinquencies in 2010. The continued improvement in late-payment trends and higher credit quality loans put on the books with “Cash for Clunkers” will start to dominate portfolio performance, offsetting worse-performing loans of 2006 and 2007 that are running off.

Here’s a comparison of 60-day delinquency rates for 2008 and 2009, per TransUnion data:

And here’s a look at the data with TransUnion’s estimate for 4Q09:

For additional findings from TransUnion’s survey, click here.