U.S. auto loan delinquencies hit record low in Q2
Customers are borrowing more and falling behind on their payments less, but record-low delinquencies in the United States probably won’t last, credit bureau TransUnion says.
Delinquencies will likely increase in the second half of 2012 but remain at low levels, said Peter Turek, automotive vice president for TransUnion’s financial services business unit.
Last week, Melinda Zabritski, director of automotive lending for Experian Automotive, voiced a similar opinion
Both analysts said delinquencies are low despite an increase in subprime borrowing, but that eventually the increase in subprime will lead to an increase in delinquencies.
According to TransUnion, delinquencies of 60 days or greater -- those that are most likely to be written off -- hit a record low in the second quarter of 2012, for the second quarter in a row. TransUnion has been tracking the data since 1999.
TransUnion said the delinquency rate for the second quarter of 2012 was 0.33 percent, down from 0.36 percent in the first quarter of this year. Year over year, auto loan delinquencies dropped 25 percent from 0.44 percent in the second quarter of 2011.
In a written statement today, Turek cited a TransUnion study conducted earlier this year. The study found that since the recession, consumers having trouble paying all their bills are putting car payments ahead of mortgage or credit card debt. That’s because they need their cars to get to work and keep their jobs. In previous downturns, mortgages had come first, Turek told Automotive News this year.
In addition, because used-car values are strong, customers are less likely to be upside-down in their auto loans, that is, owing more than the car is worth. That’s an additional motivation to keep their auto loan current, Turek said.
According to TransUnion, the average auto debt per consumer was $13,427 in the second quarter, up nearly 6 percent from $12,689 a year ago.
“It’s impressive to see auto loan delinquencies remain so low despite a growing proportion of new loans going to nonprime consumers,” Turek said.
You can reach Jim Henry at firstname.lastname@example.org.