Predicting the Path of Loan Performance
Strong credit fundamentals have compressed auto loan delinquency and loss rates for the past few years. Today TransUnion announced that the national 60-day auto delinquency rate in the first quarter fell to 0.49% ― the lowest level since the company started tracking the variable in 1999. And though bank card and second mortgages default rates have started to tick up according to the S&P/Experian Consumer Credit Default Indices, auto loan defaults fell 2 basis points to 1.45% in April.
The question is: Which way are delinquencies and losses headed for the remainder of the year?
Peter Turek, automotive vice president in TransUnion’s financial services group, expects continued improvement. “Because of improving employment and consumer confidence our forecast for the last quarter of 2011 suggests that the auto delinquency rate will continue to improve, declining 15% to 20% from today’s rate,” he said.
But some industry analysts predict slower car sales through summer. And with lenders loosening underwriting guidelines, it seems natural that consumers might become less diligent with on-time payments.
What’s your take? Are we headed for worsening loan performance by yearend or will auto finance stay strong?
