TransUnion: Non-prime Originations, Delinquencies Rose During Second Half of 2012

CHICAGO — While noticing a surge in non-prime originations,
TransUnion came out Tuesday saying that the national auto loan delinquency rate
moved higher to close 2012 but continued to remain near historic low levels.

TransUnion determined the ratio of borrowers 60 or more days
past due ticked up to 0.41 percent in the fourth quarter. In Q3, TransUnion's
rate was 0.38 percent.

However, the fourth-quarter reading dropped five basis
points from the end of 2011 when the delinquency rate was 0.46 percent.

TransUnion also spotted another recent trend that's
continuing. Bank auto debt per borrower rose for the seventh straight quarter,
increasing 5.4 percent from $13,045 in Q4 of 2011 to $13,747 in the fourth
quarter of last year.

"As expected auto loan delinquencies rose slightly in the
fourth quarter, though they remain near the all-time record low set in the
second quarter of 2012," said Peter Turek, automotive vice president in
TransUnion's financial services business unit.

"We continue to see increasing auto debt per borrower as the
new and used car sales market remains relatively strong," Turek continued.

Between the third and fourth quarters of last year,
TransUnion found more than half of states (28) experienced increases in their
auto delinquency rates. However, on a year-over-year basis analysts noticed only
14 states experienced increases in their auto delinquency rates.

On a more granular level, TransUnion indicated 52.5 percent
of metropolitan areas saw decreases in their auto delinquency rates between the
closing quarters of the past two years.

TransUnion's analysis also found that auto loan originations
continue to increase.

Total new auto loan and lease originations in third quarter
grew by approximately 15.8 percent relative to the same period a year earlier.

"Auto loan originations are analyzed one quarter in arrears,
to account for the reporting lag of new accounts," TransUnion said.

Analysts mentioned the share of non-prime, higher-risk
consumers (with a VantageScore credit score lower than 700 on a scale of
501-990) was 32.4 percent. This is somewhat higher than one year ago (30.6
percent in Q3 2011), and is significantly higher than the 27.6 percent observed
in Q3 2010.

In volume terms, the number of new accounts originated to
non-prime consumers increased 20.5 percent in the third quarter of last year
compared to a year earlier. In addition, average balances for the newly
originated auto loans increased by 1.66 percent in Q3 relative to the same
period in the prior year, climbing from $18,028 to $18,326.

"We've been observing an increase in subprime borrowers in
the auto loan space now for several quarters and we do expect this will
eventually push the overall delinquency numbers higher," Turek said.

"New loan originations are growing and that has helped the
60 day or more delinquency rate remain low, and we forecast that delinquencies
will remain about the same in the first quarter, possibly even dropping
slightly," he went on to say.

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.

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.

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