TransUnion: Q2 Subprime Volume & Delinquencies Stay Nearly Steady

CHICAGO — TransUnion spotted second-quarter trends that
ought to make dealers and finance company executives who cater to customers
with poor credit smile. Loans to subprime buyers are still being made at a steady
pace while delinquencies on those contracts are not spiking.

According to TransUnion's Industry Insights Report, subprime
borrower vehicle debt has increased more than 7 percent in the past year. Of
the total account volume for the second quarter, TransUnion found 14.9 percent
fell into subprime, the same reading the firm spotted in the year-ago period.

Analysts mentioned how much second-quarter loan volume was
categorized as subprime going back five years:

—2008: 19.9 percent
—2009: 19.9 percent
—2010: 17.8 percent
—2011: 15.7 percent
—2012: 14.9 percent
—2013: 14.9 percent

Meanwhile, TransUnion determined second-quarter delinquency
levels for subprime borrowers remained about the same, moving from 4.94 percent
in Q2 2012 to 5.02 percent in Q2 2013.

"This is a positive sign since increased balances for the
subprime group indicate that they are receiving new loans," said Peter Turek,
vice president of automotive for TransUnion.

"The fact that the increase in delinquencies is only a minor
one is especially important as we often find that borrowers who have problems making
payments do so within the first year of a loan," Turek continued.

Looking at the overall numbers, TransUnion indicated the
national auto loan delinquency rate — to reiterate, it's the percentage of
accounts 60 or more days past due — remained relatively flat year-over-year.
The second-quarter reading moved from 0.79 percent to 0.80 percent.

On a quarter-over-quarter basis, the auto loan delinquency
rate experienced an 8-basis point drop from 0.88 percent the first quarter of
the year.

Analysts highlighted that average auto loan balances
continue to increase, jumping more than 4 percent between the second quarter of
last year ($12,875) and Q2 of this year ($13,435).

Turek pointed out that every state except for Michigan
experienced an increase in average auto loan balances during this timeframe.

"Our second-quarter data are favorable for the auto loan
market as delinquencies remained largely unchanged while auto loan debt rose
once again in the last year," Turek said.

"It's encouraging to see consumers take on more auto debt
while delinquencies remain low. Consumers clearly are more confident in
managing additional debt," he went on to say.

TransUnion's Industry Insights Report also showed a
continued increase in total auto account volumes with a 4-percent rise observed
in the last year.

"As we've observed in recent quarters, total auto account
volume continues to increase," Turek said. "We expect to see volumes rise
in line with overall auto sales and other demand drivers, like replacement of
older vehicles and improving employment numbers."

TransUnion reiterated the data provided are gathered from a
quarterly overview summarizing data, trends and perspectives on the U.S.
consumer lending industry.

"The report is based on anonymized credit data from
virtually every credit-active consumer in the United States," analysts said.

 
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