TransUnion pinpoints spillover of rising vehicle prices into Q3 finance data

Finance company executives and managers know the impact from rising vehicle prices has to come to roost somewhere. TransUnion’s Q3 2021 Quarterly Credit Industry Insights Report (CIIR) offered some interesting data to illustrate the point.

The average amount financed per contract originated during the third quarter as well as the average balance still held by consumers in Q3 both made notable year-over-year rises, according to the report released on Wednesday.

TransUnion said the average amount financed in Q3 came in at $25,607. That’s up from $23,839 a year ago and $20,990 during Q3 of 2018.

Meanwhile, analysts indicated the average balance held by customers stood at $20,911 in the third quarter, marking a rise of $1,286 from last year and $2,096 in 2018.

Along with those specific metrics, TransUnion highlighted that the auto finance market continued to show signs of strength throughout 2021 with origination growth and strong performance.

Viewing one quarter in arrears to account for reporting, analysts determined originations grew to 8.2 million in Q2 2021, a 27.4% increase over the same period last year and a 12.8% rise above Q2 2019.

TransUnion also said originations recovered rapidly in 2021 with growth observed across all risk tiers and the risk distribution starting to more closely resemble pre-pandemic levels. However, analysts acknowledged that subprime origination growth year-over-year still lags behind other risk tiers due to issues such as affordability and employment challenges.

In terms of delinquency, TransUnion pointed out that the rate of 60 days past due has also shown a material improvement and reached 1.38%.

However, as accounts roll off of hardship programs a slight uptick in delinquency is to be expected, according to Satyan Merchant, who is senior vice president and automotive business leader at TransUnion.

“So far in 2021 we have seen growth in the auto industry across both originations and balances and at the same time, serious delinquency rates have declined,” Merchant said in a news release.

“While origination growth rebounded to a healthy level this past quarter, external factors such as the uncertainty surrounding semiconductor chip shortages and supply chain issues will continue to have an impact on new vehicle inventory and drive up vehicle prices,” he continued.

“We anticipate this will impact vehicle sales through the remainder of the year and possibly into 2022 despite growing consumer demand,” Merchant went on to say.

Q3 2021 Auto Loan Trends

*Note: Originations are viewed one quarter in arrears to account for reporting lag.
**Data from IHSM Catalyst
Source: TransUnion.