New data from TransUnion’s third-quarter Industry Insights Report echoes auto finance executives’ sentiments at the Auto Finance Summit that origination growth will slow in the coming months.
“We’re expecting flat originations on a year-over-year basis,” Matthew Komos, vice president of financial services research and consulting at TransUnion, told Auto Finance News, citing rising vehicle prices and consumer affordability issues. Third-quarter auto loan originations totaled 7.3 million units, flat year over year, according to the report.
New-vehicle sales are expected to drop below 17 million units for the first time since 2014, Komos explained, adding that affordability issues will likely push consumers into the used-car market. However, an influx of off-lease vehicles is expected to drive up used-car prices, further complicating affordability issues, he added.
In addition, the rate at which loan terms are being extended has started to plateau, which is one of the main ways auto lenders helped consumers afford the rising price tags for vehicles, Komos said.
For example, the average loan term for new vehicles through midyear was 69.1 months. In 2018 and 2017, average loan terms were 68.8 months, and in 2016 it was 68.3 months. “In the past, we’ve seen that increase in [loan terms] happening much quicker,” Komos said. “Now, its been slowing down quite a bit.”
Loan performance is the silver lining, with delinquencies flat in the past four years, Komos said. “We saw an uptick in 2017 from 2016, but then we’ve seen it remain flat since, hovering between 1.3% and 1.4%,” he noted, adding that the auto market remains healthy despite the origination slowdown.
