Favorable trends for auto lending should continue into 2015, including bigger average loans and leases and only small increases in delinquencies, analysts for credit bureaus TransUnion and Equifax said.
In separate comments, the companies also said that an improving economy and rising employment bode well for the industry as whole.
“There’s a strong correlation between auto sales and employment,” Pete Turek, automotive vice president in TransUnion’s financial services business unit, told Automotive News.
He said he expects the average amount of auto debt to keep rising in 2015 in tandem with auto sales.
TransUnion said on Tuesday its forecast for auto debt per customer in the fourth quarter this year is $17,480. That would be 19th consecutive quarter that the average debt was higher than the year-earlier period, the credit bureau said.
For the fourth quarter of 2015, TransUnion said it expects the average auto debt, including loans and leases, to reach $18,244, an increase of 4 percent from the estimate for the current quarter.
A year ago, TransUnion predicted the average auto debt would reach $17,966 in the fourth quarter of 2014. That’s almost $500 higher than the current forecast. Turek said lease penetration was higher than expected this year, and that probably contributed to a lower average debt, since lease customers borrow less than loan customers for the same vehicle.
Leases accounted for 29 percent of new-vehicle financing in the third quarter of 2014, up from 27 percent a year earlier, data from Experian Automotive show.
Dennis Carlson, deputy chief economist for Equifax, said in a phone interview that he agrees that higher lease penetration will probably moderate the increase in average debt. He added that increasing average loan size is “a reflection of the cost of cars going up and also more generous lending.”
In terms of late auto payments, Equifax reported on Monday that, contrary to the longer-term trend toward moderately increasing delinquencies, November saw the percentage of 60-day delinquencies drop to 1.04 percent, from 1.15 percent a year earlier.
Carlson chalked the drop up to “noise,” saying it was a monthly fluctuation, not the start of a trend. He said positive news about the economy, including job growth in November, is more significant than whether auto-loan delinquency numbers are up or down for a single month.
TransUnion said it expects 60-day delinquencies to increase to 1.27 percent in the fourth quarter of 2015, up from an estimated 1.20 percent for the fourth quarter this year.
A year ago, TransUnion predicted 60-day delinquencies would be 1.19 percent in the fourth quarter of 2014, so its prediction was basically spot-on. “We’re very pleased with the delinquency number,” Turek said.