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TransUnion: Auto Loan Growth Slowing

Originations continued to fall at a faster rate than previous years, as finance sources continued to tighten underwriting standards during 2017’s end-of-year quarter. TransUnion officials, however, say the sector is performing well as the economy remains relatively strong.

February 22, 2018
TransUnion: Auto Loan Growth Slowing

 

2 min to read


CHICAGO — Declines in the unemployment rate and delinquencies opened up the credit markets in 2017, with TransUnion reporting this month that consumer opened 20.3 million more accounts in 2017 spanning auto, credit card, mortgage, and unsecured personal loans.

The number of auto loan accounts rose 4.8% in the fourth quarter of 2017 compared to a year ago, while the 60-day delinquency rate fell one basis point to 1.43% over the same period. Factors that could stunt the fluid consumer credit economy, according to TransUnion, are material upticks in delinquency, interest rate increases beyond what is expected, and other unanticipated economic shocks.

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“Consumers continue to gain access to more credit, and balances are generally rising at a healthy clip,” said Matt Komos, vice president of research and consulting at TransUnion. “For the most part, consumers are paying their debts in a timely fashion, which has been especially evident for mortgages and personal loans. This is likely a result of the strong economy, which has helped consumers manage their personal balance sheets and build confidence.”

The firm noted that despite auto loan balances growing 5.5% to $1.179 trillion between the fourth quarters of 2016 and 2017, the growth rate was the lowest since the 5.3% increase recorded between the second quarters of 2011 and 2012. Despite the slowdown in balance growth, however, the number of auto loans grew from 75.8 million in the prior-year quarter to 79.4 million.

Originations declined for the fifth consecutive quarter, falling 4.8% in the third quarter compared to the prior-year period to 7.1 million, according to the firm, which views originations one quarter in arrears to account for reporting lag. The drop, according to TransUnion, was driven by an 8.2% year-over-year decline for the subprime, nearprime and prime credit risk categories.

“Auto lending is stabilizing after years of rapid growth. Originations continue to fall at a faster rate than previous years, balance growth is slowing and delinquencies are steady,” said Brian Landau, senior vice president and automotive business leader at TransUnion. “These metrics reflect the continuing tightening of underwriting, particularly for prime and below risk tiers.

“General speaking, the auto lending sector is performing well as the economy remains relatively strong,” Landau added. “We do not observe anything in our data that would point to significant anticipated changes in delinquencies.”

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