Auto lending outlook positive for 2014

The average amount of automotive debt per borrower is projected to increase by about $1,000 next year, from an estimated $16,942 in the fourth quarter this year to 17,966 in the 2014 quarter, TransUnion says.

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Auto finance trends will remain positive in 2014, including easier access to credit for consumers, more leasing and bigger loans, credit bureau TransUnion says.

The company reported Tuesday it expects the average automotive debt per borrower to increase about $1,000 next year, from an estimated $16,942 in the fourth quarter this year to 17,966 in the 2014 quarter.

“Unless there is a real shock to the economy, we don’t envision auto loan debt levels to drop for quite some time,” Peter Turek, TransUnion’s vice president of automotive, said in a statement. “This is good news for dealers, lenders and consumers, as higher demand for autos will lead to more auto loans, creating incentives for consumers, as auto dealers and auto lenders compete for their business.”

One downside for 2014 is an expected increase in delinquencies as subprime loans continue to increase, TransUnion said.

The credit bureau expects the percentage of auto loans past due 60 or more days to increase to about 1.19 percent in the fourth quarter of 2014, from a projected 1.1 percent in the fourth quarter this year. To put that in context, the fourth-quarter average from 2007 to 2012 was 1.32 percent, TransUnion said.

“While we expect auto loan delinquencies to rise in 2014, they will remain well below levels observed during the recession and its immediate aftermath,” Turek said.

He said relatively strong used-car prices are helping to keep the level of delinquencies low because in many cases delinquent customers can sell their vehicles and pay off their loans.

According to TransUnion, borrowers with subprime credit made up 29.8 percent of all auto loans as of the third quarter of 2013. That was significantly below the third quarter of 2008, when subprime borrowers accounted for 34.6 percent of all auto loans.

In terms of units there were about 3 million fewer outstanding subprime auto loans as of the third quarter of 2013 vs. the third quarter of 2008, a decline of close to 15 percent, TransUnion said. But in the same period, the total number of outstanding auto loans declined only about 1 percent, the credit bureau said.

More leasing

TransUnion said it expects leasing to keep expanding in 2014. Dealers and automakers generally like leasing because lease customers are more loyal on average to the same brand and dealership.

For instance, TransUnion said there were more than 1.3 million leases in the first half of 2013, up from about 1 million for the same period in 2012 and about 500,000 in the first half of 2009. TransUnion didn’t make a prediction for 2014 lease penetration except to say it expects an increase over 2013.

“With the number of new models being introduced this year and going into next year, leasing is going to be a great way for the manufacturers to get those new models out there,” Turek told Automotive News.

Turek said in the statement the increase in leasing should also offset some of the overall increase in delinquencies because leases are overwhelmingly for new vehicles and for customers with above-average credit. “We expect the number of leases to continue to rise as a percentage of all auto loans in 2014,” he said.

You can reach Jim Henry at autonews@crain.com.

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