Auto Loan Delinquencies Rise, But Consumers Continue

CHICAGO, Oct. 17, 2022 (GLOBE NEWSWIRE) — Falling inventory, rising prices and falling demand, among other factors, are at the heart of some of the changing dynamics in the auto finance market, driving increased auto loan delinquency rates. A new study from TransUnion (NYSE: TRU), “A Critical Eye on Auto Performance,found that despite an increase in serious auto loan delinquencies, consumers with multiple credit products continue to value auto loans almost as much as mortgages, and far more than their credit cards.

TransUnion’s study looked at overdue auto transactions over 60 days and included the performance of all auto loans and leases by annual and quarterly cohort. A key observation from the study: the “numerator” (or total number of delinquencies) is higher than the low level of the pandemic, but it is mainly driven by the backlog of probable delinquencies that were temporarily harbored or reinforced by the pandemic-related government assistance and other stimulus programs.

Another factor contributing to the increase in delinquency rates is that of the decreasing “denominator” derived from the total number of vehicles currently financed. The causes of this reduction include lower emissions in 2020 due to lower demand; a continued decline in assemblies in 2021 and 2022 due to the limited supply of vehicles; and an increase in repossessions and refunds in 2021 and 2022. These factors resulted in an imbalance between origination volumes and total account liquidations, which resulted in a decline in the total volume of unpaid accounts.

“Due to the unusual and unstable economic environment that has accompanied the pandemic era, it is extremely important that we look at the big picture when it comes to auto delinquencies,” said Satyan Merchant, Vice President senior and head of the automotive business at TransUnion. “While delinquency rates at any given time are high compared to previous periods, we have seen fairly stable vintage performance.”

Auto Loan Default Rate Q2 2018-2022

Q2 2018 Q2 2019 Q2 2020 Q2 2021 Q2 2022
30+ DPD* 3.20% 3.12% 2.79% 2.43% 3.34%
60+ DPD 1.05% 1.06% 1.31% 1.07% 1.43%
90+ DPD 0.39% 0.41% 0.80% 0.65% 0.79%

*DPD = days late; Source: TransUnion US Consumer Credit Database

Looking at vintage performance against delinquency, the study showed that while the Q1-Q3 vintage cohort generally performed similarly to the 2019 cohort, a slight deterioration in performance was seen during the comparison of Q4 2019 to Q4 2021.

Vintage quarterly delinquency of 6-month auto loans and leases on book

Year/Quarter 2019 2021 Difference
Q1 1.49% 1.07% -42 basis points*
Q2 1.41% 1.26% -15 basis points
Q3 1.39% 1.43% +4 base points
Q4 1.11% 1.32% +21 basis points

*bps = basis points; Source: Prama @ vintage analysis

Consumers continue to value their auto loans

The study also showed that consumers continue to prioritize automatic payments just behind mortgages in their payment hierarchy, but well above credit cards, as consumers protect products secured with a capital position. positive. Additionally, high vehicle values ​​provide consumers with positive loan-to-value positions, providing borrowers with options in times of financial difficulty. This is especially true for vintages prior to 2021, which has helped keep lender losses low.

“As the economic environment continues to evolve, lenders can prepare for a range of possible scenarios to spot trends and make decisions to best manage their portfolios. Enriched data and analytics can help lenders identify existing and emerging areas of risk and opportunity, as well as better understand customer behavior by providing a cross-sectional and longitudinal view of their performance,” concluded Merchant.

To learn more about the findings of the study and what can be done to mitigate the risk of motor vehicle crime, go here. For more information on how TransUnion CreditVision helps lenders better understand consumer credit behavior, click here.

About TransUnion (NYSE: TRU)
TransUnion is a global information and knowledge company that enables confidence in the modern economy. To do this, we provide a complete picture of each person so that they can be reliably and securely represented in the market. As a result, businesses and consumers can transact with confidence and achieve great things. We call it Information for Good.®

A leading presence in more than 30 countries on five continents, TransUnion delivers solutions that help create economic opportunity, exceptional experiences and personal empowerment for hundreds of millions of people.

Contact Dave Blumberg
Trans Union
E-mail [email protected]
Telephone 312-972-6646

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