Rosy outlook for auto loans
Consumers are borrowing more to buy a new or used vehicle with the average auto debt per borrower at an estimated $13,689 in the fourth quarter of 2012. That's expected to grow to $14,133 in the fourth quarter of 2013, TransUnion says.
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Several factors look good for auto finance growth in 2013, TransUnion says. They are low interest rates, low delinquencies, more and bigger auto loans, sharper competition among auto lenders, and high replacement demand.
"Overall, when you look at the industry, you're seeing continued growth," said Peter Turek, automotive vice president in Chicago-based TransUnion's financial services business unit.
"In 2013 maybe it's not going to be the double-digit growth like we've had this year -- auto sales are up, what, almost 15 percent. So maybe in 2013 it's high single-digits instead of double digits. It's still growth," he said in a phone interview on Monday.
Also on Monday, a report from Morgan Stanley Research reached similar conclusions, citing even more positive factors for auto finance: an improved housing market, improving consumer confidence and fuel-efficient new models.
TransUnion said in a report on Tuesday that next year it expects only a very slight uptick in auto loan delinquencies of 60-plus days, up to an estimated 0.37 percent of all loans in the fourth quarter of 2013 from an estimated 0.36 percent in the fourth quarter of 2012.
That's all the more remarkable considering subprime lending is up, Turek said. Low delinquencies are important to dealerships because low delinquencies encourage easier credit.
"There are more loans being made to nonprime, yet we're not seeing that delinquency factor like we did in the past," he said. Turek cited a TransUnion study that showed households that can't pay all their bills put car payments at the head of the line. In previous downturns, people put their mortgage payments first.
Customers are also borrowing more. TransUnion said the average auto debt per borrower, including new and used vehicles, is an estimated $13,689 in the fourth quarter of 2012. That's expected to grow to $14,133 in the fourth quarter of 2013, the credit bureau said.
One note of caution: Turek said the fiscal cliff poses a threat to the 2013 forecast if Congress can't reach a compromise.
"This forecast does not include that happening," he said.
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