U.S. auto sales may improve next year, but auto loan delinquency rates likely will get worse.
In its 2010 auto loan forecast, released today, the credit reporting agency TransUnion estimates that national delinquencies will increase 7 percent from the end of 2009 to the end of 2010. That would mark the fifth straight year that the delinquency rate has worsened or stayed the same.
“It's a relatively mild increase but certainly a cautionary number for those expecting an abrupt turnaround,” said Peter Turek, automotive vice president of TransUnion's financial services group.
TransUnion forecasts that the ratio of borrowers 60 or more days past due on their payments will jump to 0.92 percent at the end of 2010 vs. an expected 0.86 percent at the end of 2009.
For the first half of 2010, the delinquency rate actually is likely to improve, helped by tighter lending standards and the influx of new borrowers created by the U.S. cash-for-clunkers promotion, Turek said. But delinquencies then should worsen during the second half of the year, he said, as unemployment peaks and vacation, back-to-school and holiday spending strains consumers.
Only one state — California — is expected to show an improvement in 2010, Turek said. California's delinquency levels should fall by 3.55 percent. With an estimated delinquency rate of 1.35 percent at the end of 2010, California still would be above national levels. But a turnaround in the bellwether state is positive.
“It's a good sign to show that delinquency could start improving leaving 2010 and going into 2011,” Turek said.
Hard-hit Florida and Nevada are expected to have moderating delinquencies.
The sharpest year-over-year increases are expected to come in Indiana, Michigan, Kentucky and Georgia.
At the end of 2010, Mississippi, Georgia and Alabama are expected to have the nation's highest auto loan delinquency rates, TransUnion reported.