Auto loans and balances, boosted by millennials, rise in Q1

Auto loans and balances grew in volume in the first quarter, with the youngest U.S. consumers leading the way. Despite those increases, auto loan delinquencies remained flat, credit bureau TransUnion reported today.

Consumers with auto loans jumped 7.4 percent to 71.3 million during the quarter. Consumers under 30 years old, a group that some industry experts have deemed disinterested in vehicle ownership, led with the strongest auto loan increase, an 8.5-percent gain.

Total auto loan accounts reached 66.1 million, an 8.4 percent increase from the year-earlier period. The number of loan accounts is lower than the number of consumers with loans to reflect consumers’ joint responsibility on some loans, TransUnion said.

The average loan balance per borrower also grew in the first quarter, to $17,508, a 3.8 percent increase from the year-earlier period.

Sixty-day delinquency rates held steady from the first quarter of 2014 at 0.99 percent, while subprime delinquency rates inched up, to 5.19 percent from 5.14 percent. TransUnion considers loans to customers with a VantageScore 3.0 credit score lower than 601 to be subprime.

Subprime loans rise

TransUnion reports auto loan originations one quarter behind to ensure that all accounts are included in the data. New originations during the fourth quarter of 2014 hit 6.2 million, an 8.3 percent increase from the year-earlier period. Originations in the subprime risk tier rose 6.2 percent in the fourth quarter, making up 15 percent of loans during that quarter.

“The growth in both the number and size of new loans across all risk tiers reflects Americans’ continued appetite for new cars. As subprime originations grow, the delinquency rates have remained relatively steady,” Jason Laky, senior vice president and automotive business leader for TransUnion, said in a statement.

“A good economy makes buyers confident,” he added in an interview. “And lenders are also feeling confident in their ability to prudently lend to these consumers.”

‘A good sign’

The youngest consumer group, those under 30, had an average loan balance of $14,995, an increase of 3.1 percent from a year earlier. The number of consumers under 30 that had a loan balance rose 8.5 percent from a year earlier to 11.5 million.

TransUnion highlighted young buyers’ borrowing behavior to show that millennials are interested in buying cars.

“There’s been some talk about millennials not being interested in owning automobiles,” Laky said. “But it’s more a function of delayed purchase because of the recession and the slow return to good employment.”

With the economy’s improvement and young consumers moving into their earning years, more millennials are entering the market, Laky said.

“It’s a good sign for the auto industry,” he said.

You can reach Hannah Lutz at hlutz@crain.com

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