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News Now

CU System
TransUnion: Auto Loan Delinquency, Debt to Jump in 2014
CHICAGO (12/20/13)--Auto loan debt and delinquency both are expected to increase in 2014, according to TransUnion's annual auto loan forecast.
 
At the national level, the auto loan delinquency rate is projected to rise to 1.19% by the end of 2014. TransUnion estimated 2013 would end with a delinquency rate of 1.1%. The ratio is based on the number of borrowers 60 or more days past due.
 
In the past six years, the auto loan delinquency rate has been as low as 0.86% in 2012 and as high as 1.59% in 2008. The average delinquency rate for the fourth quarter between 2007 and 2012 was 1.32%
 
TransUnion said the amount of auto loan debt also is expected to jump to $17,966 at the end of 2014--more than $1,000 from the 2013 year-end projection of $16,942--and cap 15 straight quarterly increases.
 
"Unless there is a real shock to the economy, we don't envision auto loan debt levels to drop for quite some time," said Peter Turek, automotive vice president, TransUnion. "This is good news for dealers, lenders and consumers, as higher demand for autos will lead to more auto loans, creating incentives for consumers as auto dealers and auto lenders compete for their business."
 
New- and used-auto loan balances at credit unions grew rapidly in October, increasing 1.2% and 0.9%, respectively, according to the latest monthly credit union estimates from the Credit Union National Association. New-auto loan balances posted the fastest year-over-year loan growth, rising 12%, followed closely by a 10.8% increase in used-auto loans.
 
Credit unions' 60-day-plus delinquency rate has remained at 1% for the past eight months and should fall to 0.8% in 2014, according to Steve Rick, CUNA senior economist (News Now Dec. 3).
 
Turek said, "One of the primary drivers for low delinquency rates is the strength of the used-car market; borrowers who cannot afford their car loan payments usually have the option of selling the car and becoming whole on the loan."

He added, "The wide availability of this exit strategy has caused the overall volume of auto loan debt to rise faster than the delinquent volume of auto loans, which leads to a lower delinquency rate--it's a denominator effect."
 
Maine, Connecticut, Indiana and South Carolina are expected to experience the largest rise in delinquency rates, with Maine topping out at 7%. The biggest declines are projected for Oregon, Utah and Alaska.
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