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Auto delinquencies continue downward trend
CHICAGO (8/26/11)--The national auto delinquency rate--the rate of borrowers 60 or more days past due--decreased for the seventh consecutive quarter, dropping to 0.44% at the end of the second quarter, according to TransUnion, the third largest credit bureau in the U.S. The company has an ongoing series of quarterly analyses of credit-active U.S. consumers and how they are managing credit related to mortgage, credit cards and auto loans (Marketwire Aug. 23). Although auto delinquencies were expected to fall since last quarter, in part due to seasonal influences, the second-quarter TransUnion data released Tuesday shows a moderate deceleration on a year-over-year basis since the third quarter of 2010. Delinquencies in U.S. credit unions’ “all other non-mortgage loans”--which includes auto loans, unsecured personal loans and all other non-mortgage loans--dropped to 1.32% in 2010 from 1.61% in 2009. For first quarter 2011, delinquencies dipped to 1.12%, according to data from the Credit Union National Association. “Historically, first and second quarter auto delinquencies tend to be lower than those experienced in the second half of the year--all other things remaining equal,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit. “However, over the last seven quarters--on a year over year basis---we have seen delinquencies trend downward as consumers continue to pay down debt. “With auto sales improving, more auto loans are opened by consumers placing downward pressure on auto delinquency rates,” he added. “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.” Between the first and second quarters, 43 states experienced declines in their auto delinquency rates. Also, 60% of metropolitan statistical areas (MSA) saw declines in their delinquency rates last quarter. During the first quarter, 64% of MSAs experienced a decline in auto delinquency rates, compared to 49% in fourth quarter 2010. “Today, national auto delinquency rates are at historic lows, at half the levels found in credit card nonpayment rates and over 10 times lower than seen in the mortgage sector,” Turek said. “Lenders that have money to lend are attracted to auto finance, as it is a relatively low-risk, short-term asset and auto loan delinquencies are expected to remain at historically low levels through the end of the year. Consumers should benefit in the form of competitive offers, making purchase decisions easier and more affordable.” TransUnion’s forecast is based on economic assumptions--such as unemployment rates, consumer sentiment, disposable income and interest rates. The forecast changes as the economy deviates from a conservative economic forecast or if there are unanticipated shocks to the economy affecting recovery.
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