CHICAGO -

While delinquencies posted a “slight increase” during the second quarter, Jason Laky, senior vice president and automotive and consumer lending business leader for TransUnion, pinpointed the two drivers that brought more than 5 million additional consumers into the auto finance market in Q2.

According to TransUnion’s latest Industry Insights Report released on Tuesday, the number of consumers with an auto loan increased 7 percent from 72.87 million in Q2 2015 to 77.95 million in Q2 2016. During a phone conversation with SubPrime Auto Finance News, Laky pointed out what is bringing those new accounts into portfolios.

“One is we still have strong economic fundamentals,” Laky said. “Consumers are continuing to get new jobs and so the employment rolls are growing. People are getting raises so their wages and salaries are increasing year-over-year. People have the confidence to get a new car. If they haven’t worked for a while, and you just got yourself a new job, a lot of people take that occasion to get themselves newer transportation.

“The second thing is we’re still in a very good rate environment,” he continued. “Lenders are offering strong rates and even some really good lease deals. Many consumers are also choosing to finance their new-car purchase or lease their new-car purchase just because it’s a very low cost of funds to do so. People who might otherwise pay cash are choosing to finance.

In Q2, TransUnion indicated the average auto loan balance per consumer grew 2.7 percent and reached $18,177, the highest level post-recession. The average balance was up from $17,699 in Q2 of last year.

“Competition is still strong,” Laky said. “Over the past five years, as we’ve come out of the recession, there has been a return of credit unions. We’ve seen credit unions get big again in auto lending, particularly on the prime side.

“On the non-prime side, we’ve seen again some growth in confidence among the independent lenders, the ones who focus on non-prime and subprime consumers,” he continued. “When subvented financing and good lease programs are in place, captive finance companies are in play, as well.

“It’s a good market where the rising tide is lifting boats for everyone,” Laky added.

Viewed one quarter in arrears to ensure all accounts are reported and included in the data, TransUnion determined auto loan originations grew 6.4 percent year-over-year in the first quarter of 2016. Auto originations reached their highest post-recession level at 6.93 million in Q1 2016, up from 6.51 million in Q1 2015.

With so much paper in portfolios nowadays, TransUnion turned its attention to the auto delinquency rate connected to contracts 60 or more days past due.

Analysts found that in Q2 of this year the auto delinquency rate increased to 1.11 percent, an 11-basis point rise from 1.00 percent in Q2 of last year.

“While delinquency rates rose in the second quarter, auto delinquency has been at all-time lows. We do not see a cause for concern from this slight increase,” Laky said.

“It still remains a good loan to make as you’ve seen in the delinquency side,” he continued about auto financing. “That means as more lenders are competing for every loan, the buy rates face a lot of pressure.

“What lenders are doing — the ones I think are successful in the marketplace at achieving continued growth in a high-competition environment  — they’re looking for new ways to segment risk using alternative data or trended data that TransUnion has and others to better understand the risk of that particular consumer so they can carve out places where they believe that the consumer — be them subprime or prime — is going to perform better than a standard scoring model applicant,” Laky went on to say.

“When lenders can find those consumers, they can confidently compete for those loans and know they’re going to be profitable,” he added.

For more details about other segments of the credit market, TransUnion’s Q2 2016 Industry Insights Report can be reviewed here.