TransUnion Says Borrowers Prioritize Auto Loans Over Other Bills
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UPDATED: Mar 4, 2013
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Auto loan delinquencies reached near record lows at the end of 2012, according to a TransUnion report.
The national auto loan delinquency rate hovered at 0.41 percent according to the company’s late-February press release.
Despite this low national rate, 28 states saw their auto loan delinquency rates rise from the third quarter of 2012 to the fourth quarter of 2012. However, the local level fared better as 52.5 percent of metropolitan areas saw their auto loan delinquency rates fall over the past year.
Peter Turek, Automotive Vice President in TransUnion’s Financial Services Business Unit, told us via email that even though delinquency rates fluctuate by locale, they’re still at very healthy levels.
“TransUnion’s data does show a slight increase in delinquency rate from the previous quarter, however it remains near record low levels,” said Turek.
He attributes these optimistic numbers to the fact that people are prioritizing their auto loan payments over other bills.
“Consumer payment behavior changed during the recession and as a result consumers placed a greater priority on paying their auto loans versus other debt obligations such as mortgages and credit cards,” said Turek.
TransUnion’s findings are in general agreement with Experian’s recent report, which found that sixty-day auto loan delinquencies increased in the fourth quarter of 2012.
TransUnion noted that the share of non-prime borrowers increased over the past few years. For instance, the number of new originations to non-prime consumers rose by 20.5 percent in the third quarter of 2012 compared to the third quarter of 2011.
“We’ve been observing an increase in sub-prime borrowers in the auto loan space now for several quarters and we do expect this will eventually push the overall delinquency numbers higher,” said Turek in the press release.
Turek expects delinquencies to follow historical seasonal patterns, and estimates they will drop slightly by the end of 2013. In contrast to this, Experian expects that the auto loan market will maintain its stability.
TransUnion compiles this data based upon a wide-range of economic assumptions as part of an ongoing quarterly analysis series.