CHICAGO — Total auto loan balances in the third quarter grew 9% from a year ago to $1.1 trillion, with subprime balances leading the way, TransUnion reported on Monday.
Subprime balances grew 11.4% from a year ago. However, the credit tier only accounted for $172 million of the third quarter's $1.1 trillion total balance.
“Subprime balance growth outpaced overall growth in the auto loan sector in the third quarter, but subprime consumers’ share of balances has remained steady in the last few years,” said Jason Laky, an executive with TransUnion. “We’re observing increased delinquency rates, but this is a natural function of more nonprime consumers with an auto loan. We hope that steady job growth and wage gains will enable delinquencies to continue at low rates and support continued auto sales growth, though potentially at a more moderate pace than in recent years.”
According to the firm, the delinquency rate for consumers 60 days or more past due reached 1.33% in the third quarter, up from 1.19% in the year-ago quarter.
In the second quarter, originations totaled 7.27 million, up slightly from 7.24 million originations in the second quarter of 2015. Additionally, for the first time since 2010, nonprime originations declined.
“The second quarter of 2016 marked the first sign of a slowdown in nonprime originations, but the flat growth in total originations was in line with the expected plateauing of new-vehicle sales,” Laky said.
Across all credit markets, more than 15 million consumers had a personal loan in the third quarter, a year-over-year increase of 1.5 million. Due to this increase and a $17 billion balance growth that occurred last year, personal loan balances surpassed $100 billion — a first for the third quarter.
However, total personal loan balances also experienced the slowest third quarter growth rate since the third quarter of 2013. In the third quarter of this year, balances grew 20.9%, compared to 24.9% during the same period last year.
“The consumer credit market is performing well, as more consumers are gaining access to loans and paying them off in a timely fashion,” said Nidhi Verma, senior director of research and consulting for TransUnion. “We continue to see strong participation rates from the youngest consumer group, coupled with low delinquency levels — a promising sign for the industry.”