Chicago-based TransUnion said last week it expects auto delinquencies next year to remain at or near today's record low levels, and that's a green light for auto lending.
TransUnion predicted that the percentage of auto loans that are delinquent 60 days or more will remain at about 0.51 percent by the end of 2012, give or take some seasonal fluctuations during the year. Auto loan delinquencies peaked at 0.86 percent in the fourth quarter of 2008, TransUnion said.
Delinquencies are down since then in part because the economy improved and consumers are better able to pay. In addition, auto lenders tightened their standards during the recession, so newer loans on the books are performing better, Turek said.
Lenders have stayed conservative in approving loans even though the recession is over. All this year dealers have complained that approvals continue to be difficult, especially for subprime customers.
He said lenders today are better at matching individual borrowers to a particular piece of "collateral." That's how lenders have to think of a vehicle, as an asset that may have to be resold if a loan goes bad.
"The lenders are smarter around collateral risk, and they're smarter around consumer credit risk," Turek said. "Today, they are not going to put a college kid in a luxury car."