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Delinquency Rates Continue To Fall In 2Q

September 01, 2009

CHICAGO — The industry experienced a drop in the 60-day auto delinquency rate in the second quarter 2009, reflecting a seasonal pattern rather than a change in the current lending environment, according to TransUnion’s quarterly report on auto lending trends.

The national 60-day auto delinquency rate dropped between the first and second quarters of 2009 (0.83 percent to 0.73 percent). However, the year-over-year delinquency rate at the national level increased 7.35 percent in the second quarter.

Auto loan delinquency was highest in Mississippi and Louisiana at 1.29 percent and 1.27, respectively. The lowest auto loan delinquency rates were found in Alaska (0.33 percent), North Dakota (0.37 percent) and Wyoming (0.39 percent). The largest improvements in delinquency from the previous quarter were found in the District of Columbia (64.1 percent decrease from 1.17 percent) and Alaska (50 percent decrease from 0.66 percent).

Average auto debt nationally continued to decrease slightly in the second quarter 2009 from $12,596 to $12,560. Likewise, the year-over-year auto debt fell by 2.4 percent. The state with the largest auto debt burden was Nevada at $14,900, followed by the District of Columbia at $14,777. The lowest average auto debt was in Nebraska at $10,712. The steepest annual increases in average auto debt as a percentage occurred in Michigan (+2.6 percent), Rhode Island (+2.21 percent) and Connecticut (+2.02 percent), while Alaska experienced the sharpest drop in average auto debt (-3.8 percent) followed by Arizona (-2.66 percent).

"The drop in the second quarter 60-day auto delinquency rate reflects more seasonal patterns rather than a change in the current lending environment," said Peter Turek, automotive vice president in TransUnion's financial services group. "On a state-level basis, 42 states experienced a drop in their quarter-to-quarter delinquency rates while only 10 showed a drop on a year-over-year basis.”

Turek said the availability of funding (liquidity crisis) in the market, consumer demand for auto financing and tighter lending standards contributed to a significant decrease in the number of auto loans in the market, resulting in upward pressure on delinquency rates. In addition, the drop in average auto loan debt reflected the maturation of existing loans and the corresponding decreases in new auto loan originations over the past several months.

"Our current forecasting models indicate that the national 60-day auto delinquency rate will rise to almost 0.90 percent by year-end, which is a 4.65 percent increase over the prior year," said Turek. "Although the effects of the government's various stimulus programs seem popular and the auto industry is reporting sales increases or a leveling-off of losses, the weak labor market should continue to negatively impact the consumer into 2010. Additionally, with the recent federal government funded 'clunkers' program, there is a good possibility that average auto debt will increase in the second half of the year, as new and higher auto loan amounts start showing up on consumer credit files."

Information for TransUnion’s quarterly analysis is gathered from approximately 27 million anonymous, individual credit files, providing a real-life perspective on how U.S. consumers are managing their credit health.

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