TransUnion forecasts slight uptick in 2023 U.S. auto loans

Strong consumer demand for vehicles, an expected improvement in new-vehicle inventory and a drop in used-vehicle prices should spur an uptick in U.S. auto loans in 2023, according to a TransUnion forecast.

The credit bureau said it expects roughly 28.8 million U.S. auto loans to be originated in 2023, up about 5 percent from 2022.

The projected rise would be a rebound from the estimated 6 percent drop in auto loan originations in 2022 compared with 2021.

Most of the growth in auto loan originations should be in the second half of this year, the Chicago data provider said, with each of the credit risk tiers posting an increase of at least 6 percent in the fourth quarter.

"It's a sign of global production and global supply chains returning to some normalcy," Satyan Merchant, TransUnion's senior vice president and auto business leader, told Automotive News in mid-December. "And it's a sign of a consumer, while still probably being challenged with inflation and even now rising interest rates, still having a demand and having a need for a vehicle so they can live their lives and they can continue to be productive."

TransUnion also said by the end of 2023, the percentage of borrowers who are more than 60 days delinquent on their auto loans should slide to 1.9 percent. That would be down only about 0.05 percentage points from the end of 2022, a year that had a steady rise in these delinquencies.

"We foresee that climb will no longer continue," Merchant said. "It will just level off."

Merchant said car buyers who have saved a lot of cash since the pandemic with the help of government stimulus packages face a challenge with high inflation.

"That's taking a bite out of the consumers' wallet," Merchant said of inflation. "Unfortunately, I think in auto revenue, now that the vehicles are finally starting to be available, the consumer is in a little bit of a challenging position with inflation. And on top of it right now, the unemployment picture looks pretty good still, but there's a lot of concern in the industry about unemployment."

With new-vehicle monthly purchase payments averaging more than $700 and used-vehicle payments at more than $500, Merchant said the focus needs to be on affordability, offering car buyers online prequalification, more personalized lending options and a return to leasing.

The company's projections are based on several factors including consumer credit data, employment and inflation rates, savings, wages and U.S. vehicle sales.

Merchant stressed these projections are subject to change if there are unexpected shocks to the economy.

"We see normal continued growth of auto loans," he said, "but if we hit a recession again it wouldn't be surprising if the auto loans shrank."