Delinquency Rates Experience Seasonal Drop in 1Q
The automotive finance industry experienced a drop in the 60-day auto delinquency rate in the first quarter 2009, reflecting a seasonal pattern rather than a reversal of the trends associated with the current lending environment, according to TransUnion’s quarterly report on auto lending trends.
CHICAGO — The automotive finance industry experienced a drop in the 60-day auto delinquency rate in the first quarter 2009, reflecting a seasonal pattern rather than a reversal of the trends associated with the current lending environment, according to TransUnion’s quarterly report on auto lending trends.
The national 60-day auto delinquency rate dropped slightly between the fourth quarter 2008 and the first quarter 2009 (0.86 percent to 0.83 percent). However, year-over-year the delinquency rate at the national level increased 27.69 percent in the first quarter 2009.
Auto loan delinquency was highest in Mississippi
at 1.49 percent, followed by Louisiana at 1.40 percent. The lowest auto loan delinquency rates were found in South Dakota (0.34 percent), North
Dakota (0.35 percent) and
Wyoming (0.44 percent). The largest improvements in delinquency from the previous
quarter were found in South Dakota (45.16
percent decrease from 0.62 percent) and Vermont (33.3 percent decrease from 0.99 percent).
Average auto debt nationally continued to decrease slightly in the first quarter of 2009 from $12,713 to $12,596. Likewise, year-over-year auto debt fell by 1.85 percent. The state with the largest auto debt burden was Nevada at $15,080, followed by Texas at $14,748. The lowest average auto debt was in Nebraska at $10,629. The steepest annual increases in average auto debt as a percentage occurred in Michigan (+1.49 percent), New Jersey (+1.38 percent) and Rhode Island (+0.48 percent), while South Dakota experienced the sharpest drop in annual average auto debt (-4.61 percent) followed by Utah (-3.38 percent).
The drop in the first quarter 60-day auto delinquency rate reflects more seasonal patterns rather than a reversal of the trends associated with the current lending environment. As in recent quarters, both the availability of funding (liquidity crisis) in the market for auto loans and tighter lending standards have significantly decreased the number of auto loans in the market, putting continued upward pressure on delinquency rates.
On a state-level basis, 27 states experienced a drop in their quarter-to-quarter delinquency rates while only one (South Dakota) showed a drop on a year-over-year basis. It is interesting to note the deteriorating risk environment has now affected even Alaska, which at the end of last year showed an extremely low auto delinquency rate of 0.19 percent. In the first quarter of 2008 Alaska's delinquency rate increased by 247 percent quarter-to-quarter and 78 percent on a year-over-year basis — the largest increase for 2009.
"At the end of the 2001 recession, the national auto delinquency rate increased to a high of just over 1 percent, and then began to edge downward for the next four or five years," said Peter Turek, TransUnion's automotive vice president.
He said as the recession ended in November 2001, three of the five riskiest cities in the country were found in Texas: El Paso (5.00
percent), McAllen (2.46 percent) and Laredo (2.09 percent). In the current recession, Laredo still leads in terms of auto delinquency
(3.08 percent), but is followed closely by metropolitan areas within the
state of California such as Visalia (2.33 percent) — reflecting the impact of
the housing market on that state's economy. The least risky metropolitan
area is Corvallis, Ore., which has an almost zero auto
delinquency rate — a position consistent with what it held during the previous
recession, Turek added.
“Our current forecasting models indicate that the national 60-day auto delinquency rate will rise to about 1 percent by year-end, about the same level as that experienced at the end of our last recession," continued Turek. "However, the overall economy, weak labor market and lower disposable income levels will continue to negatively impact the consumer well into 2010."
At the state level, Mississippi is still anticipated to experience the highest delinquency rate by fourth quarter 2009 (1.94 percent), while South Dakota should prove to have the lowest level of auto delinquency (0.44 percent).
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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