TransUnion: Delinquency Rate Sets New Record Low for Second Straight Quarter

Normal
0
false
false
false
EN-US
X-NONE
X-NONE

/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:””;
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin-top:0in;
mso-para-margin-right:0in;
mso-para-margin-bottom:10.0pt;
mso-para-margin-left:0in;
line-height:115%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:”Calibri”,”sans-serif”;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:”Times New Roman”;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;}

CHICAGO — For the second consecutive quarter, the national
auto loan delinquency rate — the ratio of borrowers 60 or more days past due —
hit its lowest level since TransUnion began tracking the data in 1999.

Analysts indicated second quarter auto loan delinquency
rates dropped to 0.33 percent, down from 0.36 percent in the first quarter.

On a year-over-year basis, delinquencies declined 25 percent
from 0.44 percent in the second quarter of last year.

"It's not surprising that auto loan delinquencies remain at
record low levels," said Peter Turek, automotive vice president in TransUnion's
financial services business unit.

"A recent TransUnion study found that consumers now value
their auto loans more than their credit cards and mortgages," Turek continued. "This
is partly due to the need for transportation to get to work or to seek
employment in a difficult job market.

"Additionally, consumers with car loans have more equity in
their vehicle than they have in the recent past because of the strong used-car
vehicle market. Consumers want to keep their auto loan relationships in good
standing," he went on to say.

In addition to increased demand in new and used vehicles,
TransUnion noted bank auto debt per borrower has risen nearly 6 percent from
$12,689 in the second quarter of last year to $13,427 in the second quarter of
this year.

Despite growing bank auto debt, TransUnion determined the
majority of states and cities are experiencing declines in their auto loan
delinquency rates.

Between the second quarter of last year and the same period
this year, analysts found 37 states experienced declines in their auto
delinquency rates.

On a more granular level, TransUnion discovered 58 percent
of metropolitan areas saw decreases in their auto delinquency rates this past
quarter. The firm said this level is down from the prior period when 66
percent of MSAs experienced decreases.

"It's impressive to see auto loan delinquencies remain so
low despite a growing proportion of new loans going to non-prime consumers," Turek
added.

On a year-over-year basis, TransUnion pointed out the
percentage of new auto loans to non-prime borrowers, with a VantageScore
credit score lower than 700 on a scale of 501-990, increased by 9 percent.

In the last two years between the second quarter of 2010 and
the second quarter of this year, Turek calculated the percentage of new auto
loans to non-prime borrowers has increased more than 20 percent.

"With the increase in non-prime borrowing, we do anticipate
that auto loan delinquencies will begin to increase," Turek projected.

"We are at such a low auto loan delinquency level — far from
normal standards — that a slight rise through the end of the year should be
expected, though the overall rate will likely remain relatively low," he went
on to say.

This information is reported by TransUnion and is part of
its ongoing series of quarterly analyses of credit-active U.S. consumers and
how they are managing credit related to mortgages, credit cards and auto loans.

TransUnion's forecast is based on various economic
assumptions, such as unemployment rates, consumer sentiment, disposable income
and interest rates. The forecast changes as the economy deviates from a
conservative forecast or if there are unanticipated shocks to the economy
affecting recovery.