CHICAGO — A key macroeconomic element factored greatly into TransUnion's projection that auto loan delinquencies — or borrowers 60 or more days past due — will climb in 2010.

Officials explained that if the borrower doesn't have or loses a steady job or source of income, the likelihood of an account falling into this category grows tremendously.

And with nationwide unemployment figures already in double digits with the possibility of it climbing, it caused Peter Turek, automotive vice president in TransUnion's financial services group, to step back when the company issued its report. TransUnion believes delinquencies will climb by about 7 percent by the end of 2010.

"My initial reaction, based on everything else I had seen, was that the increase would be a lot less," Turek shared in a recent interview with SubPrime Auto Finance News.

"When you look at unemployment and the projections for unemployment that indicate a continuing rise through the fourth quarter of 2010, (the delinquency projection) then makes sense to me, because there is a strong correlation between unemployment and the 60-day auto delinquency rate," Turek continued.

"Despite that, I think the rate of increase is relatively mild compared to the previous 18 months," he added. 

Turek refuted anyone with anticipation of sales levels and lending activity returning to points seen a couple of years ago by reiterating TransUnion's projections.

"I think it's more of a cautionary number to those people who are expecting an abrupt turnaround. I don't think that's going to happen in 2010," he pointed out.

The expected increase will be the fifth straight year the nation's 60-day auto loan delinquency rate will have either remained the same or increased from the previous year. This statistic was expected to come in at 0.86 percent at the end of 2009. TransUnion is forecasting the figure to reach 0.92 percent by the end of this year.

However, that forecast is not the highest percentage that's been recently recorded. Turek pointed out that delinquencies spiked to 1.01 percent during the fourth quarter of 2001 when the country was mired in the most recent recession prior to the current one.

Though the overall amount of delinquencies is expected to increase, Turek shared some hope for how recent activity will eventually start to help that figure slowly decline.

"For the past 12 to 14 months, lenders have tightened lending standards and they're putting on the books auto loans for consumers with credit that's more toward the prime side or near prime," Turek noted.

"We expect that will help contribute to the deceleration of delinquency, as well as the natural paying off of auto loans," he went on to say.

Another element Turek noted in the delinquency decline mix was the Cash for Clunkers program that was rolled out last year.

"Cash for Clunkers was a significant increase in the number of loans," Turek indicated to SubPrime Auto Finance News.

"The lenders were continuing to use the tighter lending standards, so you have a bulk of loans from August and early September that will start aging in 2010, and will contribute to what we expect is positive instead of as delinquent loans," he explained.

Despite those positive signs and with delinquencies still expected to rise this year, Turek doesn't expect lenders to begin to loosen borrowing standards any time soon.

"When we look at what's going on in the industry, I think you have to look at the overall consumer and what's going on, and that's what the lenders look at," Turek said.

"They have to take into account not only how they making their auto payments but also their mortgage payments, how they're paying their credit cards bills," he continued.

"I believe there's still a great deal of uncertainty in the market in terms of how consumers are spending. There's also uncertainty in unemployment," Turek went on to note.

"With that uncertainty, there's going to be a reluctance of lenders to change interest rates or fees until they get more clarity in the direction of what's going on," he concluded.