The effects of the pandemic continue to pummel subprime automotive consumers, who have the lowest origination levels and highest delinquency rates, credit bureau TransUnion and the Federal Reserve Bank of New York said in separate reports last week.
Auto loan delinquencies crept up in the fourth quarter, driven by subprime customers struggling to pay back their loans. As more subprime customers exit forbearance programs, that figure is likely to climb, TransUnion said.
Weak demand may be a stronger factor for low origination levels than lenders tightening standards, says Satyan Merchant, senior vice president and automotive business leader at TransUnion. But those subprime customers who do have auto loans aren't paying them off at the same rate they did before the pandemic, he said.
"It's safe to say lenders were looking at risk in a measured way, but that's just part of the story," Merchant said.
The serious delinquency rate, or auto accounts unpaid 60 days past due, rose to 1.57 percent in the fourth quarter, up from 1.5 in the fourth quarter of 2019.
Additional stimulus and flattening unemployment rates have kept delinquencies in check thus far in the pandemic, according to Merchant. The true test of how American vehicle owners fare amid pandemic conditions will occur once forbearance programs close in the second quarter, he said.