TransUnion: Auto Delinquencies Fall to Record Low for Second Straight Quarter

CHICAGO — For the second consecutive quarter, the national auto loan delinquency rate hit its lowest level since TransUnion began tracking the data in 1999.

Auto loan delinquency rates in the second quarter dropped to 0.33 percent, down from 0.36 percent the first quarter. On a year-over-year basis, auto loan delinquencies declined 25 percent from 0.44 percent in the second quarter 2011, according to TransUnion.

"It's not surprising that auto loan delinquencies remain at record low levels," said Peter Turek, automotive vice president in TransUnion's financial services business unit. "A recent TransUnion study found that consumers now value their auto loans more than their credit cards and mortgages. This is partly due to the need for transportation to get to work or to seek employment in a difficult job market.

“Additionally, consumers with car loans have more equity in their vehicle than they have in the recent past because of the strong used car vehicle market. Consumers want to keep their auto loan relationships in good standing,” he added.

In addition to increased demand in new and used autos, bank auto debt per borrower has risen nearly 6 percent from $12,689 in the second quarter 2011 to $13,427 in the recent quarter. Despite growing bank auto debt, the majority of states and cities are experiencing declines in their auto loan delinquency rates.

Between the first and second quarter of this year, 37 states experienced declines in their auto delinquency rates. On a more granular level, 58 percent of metropolitan areas realized decreases in their auto delinquency rates in the second quarter. This is down from the prior period where 66 percent of MSAs experienced decreases.

"It's impressive to see auto loan delinquencies remain so low despite a growing proportion of new loans going to non-prime consumers," Turek added.

On a year-over-year basis, the percentage of new auto loans made to nonprime borrowers (with a VantageScore credit score lower than 700 on a scale of 501-990) in the second quarter increased by 9 percent. In the last two years (between Q2 2010 and Q2 2012), the percentage of new auto loans to nonprime borrowers has increased more than 20 percent.

"With the increase in non-prime borrowing, we do anticipate that auto loan delinquencies will begin to increase," Turek said. "We are at such a low auto loan delinquency level — far from normal standards — that a slight rise through the end of the year should be expected, though the overall rate will likely remain relatively low."

Q2 2012 Bank Auto Statistics - Delinquency Rates

Q2 2012 Bank Auto Statistics - Bank Auto Debt Per Borrower

Note: Only two states experienced year-over-year declines