Auto Borrowers More Likely to Pay Back Loans
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UPDATED: Sep 16, 2011
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September 16, 2011 – In spite of a tough economic climate, auto loan borrowers are proving that they are able to make their loan payments on time.
A study from TransUnion credit and information management company released in August shows that the national rate of borrowers who are 60 or more days past due on their loan payments, known as the auto delinquency rate, decreased in the second quarter of 2011.
The rate was 0.53 percent last year but now sits at 0.44 percent, in the seventh straight quarter in which the delinquency rate has dropped – even with auto loan size increasing. Although rates are usually expected to be lower in the early quarters of the year, the company’s studies have seen a year-to-year decreasing trend.
“Over the last seven quarters – on a year over year basis – we have seen delinquencies trend downward as consumers continue to pay down debt,” Automotive Vice President for TransUninon’s financial services business unit Peter Turek said. “With auto sales improving, more auto loans are opened by consumers placing downward pressure on auto delinquency rates.”
He added that the auto market has not felt as large of a hit as other loan industries. “A consumer’s ability to repay is also helped by the recent low interest rates for new and used car loans, making purchase decisions and monthly payments more affordable,” Turek said.
In general, auto loans have a lower delinquency record because cars can be more quickly and easily repossessed than a home. As a result, borrowers are more likely to make these payments before other financial obligations. TransUnion estimates that the rate will continue to decrease during the rest of the year.