Late auto payments rise, but remain low, TransUnion says

Auto loans delinquencies ticked up in the second quarter but remain low and pose no immediate threat to the auto-finance industry, an executive at credit bureau TransUnion says.

In the second quarter of 2014, auto loan delinquencies rose to a rate of 0.95 percent of borrowers delinquent by 60 days or more, from a rate of 0.87 percent in the year-earlier period.

Pete Turek, vice president of automotive in TransUnion’s financial services business unit, told Automotive News last week that for now he’s not that worried about the uptick in delinquencies, which are still low by historical standards.

Since the fourth quarter of 2007, when the recession began, the high point for delinquencies was a rate of 1.59 percent in the fourth quarter of 2008, when the downturn was at full throttle.

“All in all, we have a very healthy auto-finance industry right now,” Turek said.

In the long run, an increase in delinquencies would encourage auto lenders to get tougher on approvals.

Subprime a factor

The recent low in delinquencies was a rate of 0.86 percent in the second quarter of 2012, TransUnion said. Counting second quarters from 2007 though 2014, the second quarter average delinquency rate was 1.05 percent, the credit bureau said. TransUnion averaged out second-quarter data to control for seasonal variation in delinquencies.

An increase in loans to customers with subprime credit has helped raise the average delinquency rate overall, TransUnion said. The rate for customers with subprime credit, defined as credit scores of 640 or below, was 4.61 percent in the second quarter, up from 4.12 percent in the year-earlier period, the credit bureau said.

The average outstanding amount per borrower on auto loans was $17,090 in the second quarter, up 4.1 percent from the same period a year ago, according to Chicago-based TransUnion.

That’s a good sign because in the downturn of 2008 and 2009, consumers postponed taking on new debt, he said. “Borrowers are willing to take on more debt, and not just in autos. You don’t see any decline in debt, it’s all going up,” he said.

Worth watching

Turek said delinquencies are worth keeping an eye on, however.

He said the fact that originations are growing tends to mask the fact that delinquencies are growing in absolute terms, even though the percent increases aren’t that high.

“The fact that originations are growing means you don’t see it producing as much of an increase in percentage terms as you might expect,” he said. “After all, 1 percent of 1,000 is a different thing from 1 percent of 1 million.”

You can reach Jim Henry at

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