TransUnion: Latest Auto Loan Delinquency Rate Change Follows Seasonal Pattern

CHICAGO — The seasonal movement TransUnion spotted several
times when looking at national auto loan delinquency rates for the second and
third quarters of a calendar year unfolded similarly again in 2012.

Analysts determined the ratio of borrowers 60 or more days
past due rose from 0.33 percent in the second quarter of this year to 0.38
percent in the third quarter. But they pointed out the rate remains near
historic low levels.

One year ago, the auto loan delinquency rate was 0.47
percent, according to TransUnion.

While auto loan delinquency rates remain relatively low,
analysts found bank auto debt per borrower continued to rise, increasing 5
percent from $12,902 in the third quarter a year ago to $13,571 in the third
quarter of this year.

"Since TransUnion began tracking the auto loan delinquency
rate in 1999, we have observed a seasonal increase in this variable every year
between the second and third quarters," said Peter Turek, automotive vice
president in TransUnion's financial services business unit.

"This has occurred even with auto loan delinquencies
dropping 56 percent since the recession high of 0.86 percent set in the fourth quarter
of 2008. Seasonal factors include consumers balancing increased spending due to
back to school needs and holiday purchases," Turek continued.

Between the second and third quarters of this year,
TransUnion noted 38 states experienced increases in their auto delinquency
rates. However on a year-over-year basis, the firm discovered only seven states
experienced increases in their auto delinquency rates.

On a more granular level, analysts said 54 percent of
metropolitan areas saw increases in their auto delinquency rates during the
third quarter. This movement is up from the prior period when 42 percent of
MSAs experienced increases.

TransUnion mentioned auto loan originations also continue to
increase.

Analysts computed that total new auto loan and lease
originations in the second quarter grew by approximately 16 percent relative to
the same period last year. They explained auto loan originations are analyzed
one quarter in arrears to account for the reporting lag of new accounts.

The share of non-prime, higher-risk consumers (with a
VantageScore credit score lower than 700 on a scale of 501-990) was 32.8
percent, according to TransUnion. This level is somewhat higher than one year
ago (30.2 percent in the second quarter), and is significantly higher than the
27.5 percent observed in the second quarter of 2010.

In volume terms, TransUnion found the number of new accounts
originated to non-prime consumers increased 25.6 percent in the second quarter
compared to the same span a year earlier.

In addition, average balances for new auto loans increased
by 2.4 percent in the second quarter relative to the same period last year,
ticking up from $17,829 to $18,258.

"With increased auto loan balances and more loans going to
non-prime borrowers, it is plausible that some pressure may be placed on the
auto loan delinquency rate," Turek said. "However, as the economy continues to
improve and new and used auto demand maintains its current pace, we believe
that the auto loan delinquency rate will either remain the same or even drop a
few basis points by the end of the year."

Turek added 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," he said.

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