TransUnion: Seasonal Patterns Result in a 10 Percent Rise in National Auto Loan Delinquency Rates in Third Quarter of 2010
CHICAGO, IL--(Marketwire - December 21, 2010) - The national 60-day auto delinquency rate (the ratio of auto loan borrowers 60 or more days past due) rose 9.4 percent between the second and third quarters of 2010 to 0.58 percent, according to a TransUnion quarterly analysis of trends in the auto industry. The year-over-year delinquency rate at the national level fell by 28.4 percent in the third quarter.
TransUnion forecasts that the 2011 auto loan delinquency rate -- which looks at the ratio of auto loan borrowers 60 or more days past due -- will experience a 3.2 percent decline throughout next year. TransUnion is projecting a 0.62 percent delinquency rate at the end of 2010 and a 0.60 percent rate at the conclusion of 2011.
TransUnion expects national auto loan delinquency rates in 2011 to continue to be well below the peak levels experienced during the heart of the recession in the fourth quarter of 2008. In fact, the projected delinquency rate would be more than 30 percent below that level.
Newer, lower-risk loans are still entering the market and are helping to reduce delinquency rates, though consumers are still cautious in the short term given the employment situation, focusing their attention on savings and lower consumption of discretionary goods.
TransUnion estimates that the 60-day auto delinquency rate will continue to exhibit seasonal patterns and gradually stabilize next year.
Forty-five states and the District of Columbia are expected to experience declines in auto delinquency next year, led by Montana, Missouri and Indiana. Though five states are expected to see higher auto loan delinquencies next year, the increases should be relatively small.
Quarterly Auto Statistics
- Auto loan delinquency was highest in Mississippi and Louisiana at 1.12 percent and 1.10 percent, respectively. The lowest auto loan delinquency rates were found in Wyoming (0.23 percent), North Dakota (0.23 percent) and Pennsylvania (0.32 percent).
- Largest improvements in delinquency from the previous quarter were found in Rhode Island (33.8 percent decrease from 0.74 percent) and Wyoming (30.3 percent decrease from 0.33 percent).
- Auto loan delinquency rates rose for all but fifteen states since the second quarter of 2010 -- the District of Columbia came in at 0.95 percent (a 106.5 percent increase), Vermont at 0.52 percent (a 52.9 percent increase), and Arizona at 0.70 percent (37.2 percent increase).
- Average auto debt nationally fell slightly quarter over quarter from $12,643 to $12,500. Year-over-year, auto debt remained essentially flat in the third quarter.
- The District of Columbia held the largest average auto debt burden at $15,216, followed by Wyoming at $14,374. The lowest average auto debt was in Ohio at $11,131.
- The regions with the steepest quarterly increases in average auto debt on a percentage basis were Wisconsin (+2.9 percent), Mississippi (+2.4 percent) and New Jersey (+1.9 percent). Idaho experienced the sharpest drop in average auto debt (-5.5 percent), followed by Texas (-3.6 percent).
- Year-over-year, national bank auto originations increased by 5 percent. North Dakota led all other areas showing an increase in auto originations of 29.2 percent since the third quarter 2009. On a regional basis, seven states showed a drop in year-over-year originations.
Analysis and Supporting Quotes
"Although nonpayment behavior ticked up by almost 10 percent in the third quarter, the increase is attributed to expected seasonal factors and not an underlying change in how consumers are repaying their debt obligations. The good news is that TransUnion expects national auto delinquency rates to continue to be well below the peak of 0.86 percent -- a rate experienced during the heart of the recession in the fourth quarter of 2008. Although newer lower risk loans are still entering the market, helping to mute delinquency rates, consumers remain cautious in the short term given the employment situation, focusing their attention on savings and lower consumption of discretionary goods.
"This trend toward fiscal responsibility is reflected in year-over-year results, as auto delinquency rates now have dropped 28.4 percent since third quarter 2009 -- the largest decline since the summer of 2001. On a state-level basis, 12 states experienced a drop in their quarter-to-quarter delinquency rates, while only 2 states showed an increase on a year-over-year basis."
Peter Turek, automotive vice president in TransUnion's financial services group
Auto Delinquency Forecast
"Since the beginning of the recession, TransUnion's national and state forecasting models have accurately tracked how the national 60-day auto delinquency rates are impacted by economic factors such as per capita disposable income, interest rates for new car loans, unemployment rates, and new vehicle registrations. These delinquency models continue to perform well, as they predicted this quarter's national delinquency rate at 0.59 percent, about as close as one can get to the 0.58 percent actual rate.
"Our forecast for the fourth quarter of 2010 is that auto delinquency will reach a rate of around 0.6 percent. Based on our current economic assumptions, TransUnion believes that the 60-day auto delinquency rate will continue to follow seasonal patterns and gradually begin to stabilize into next year."
Peter Turek, automotive vice president in TransUnion's financial services group
Overview of U.S. Consumer Credit Status 3Q10; Forecasts for 2011
The national mortgage loan delinquency rate decreased again in the third quarter of 2010 to 6.44 percent, marking the largest quarterly decline since the fourth quarter of 2006. This reflects a decrease of 3.45 percent from the previous quarter's 6.67 percent national average. Year over year, mortgage borrower delinquency is still up approximately 3.04 percent (from 6.25 percent in the third quarter 2009).
The national credit card delinquency rate decreased to 0.83 percent in the third quarter of 2010, down almost 9.8 percent over the previous quarter. Year over year, credit card delinquencies fell by 24.6 percent.
TransUnion's analysis estimates that more than eight million consumers stopped actively using bank-issued, general purpose credit cards over the past year. This deleveraging is believed to be due in part to charge-offs in the higher risk segments of the population, more conservative spending in the low-risk segments, and significant efforts by consumers across the board to maintain the health of their credit card relationships as a financial cushion.
National average credit card borrower debt edged upward for the first time in six quarters by 0.28 percent to $4,964 from the previous quarter's $4,951, but down 11.54 percent compared to the third quarter of 2009 ($5,612).
TransUnion forecasts that national mortgage loan delinquencies (the ratio of borrowers 60 or more days past due) will drop nearly 20 percent by the end of 2011 to 4.98 percent from an expected 6.21 percent at the conclusion of 2010.
TransUnion forecasts that the credit card delinquency rate (the ratio of bankcard borrowers 90 days or more delinquent on one or more of their credit cards) will experience a 10.67 percent decline from a projected 0.75 percent delinquency rate at the end of 2010 to 0.67 percent at the conclusion of 2011.
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TransUnion's Trend Data database
The report is part of an ongoing series of quarterly consumer lending sector analyses focusing on credit card, auto loan and mortgage data available on TransUnion's Web site. Information for this analysis is culled from TransUnion's Trend Data, a one-of-a-kind database consisting of 27 million anonymous, credit-active consumer records that provide a real-life perspective on how consumers are managing their credit health.
Randomly sampled every quarter from TransUnion's national consumer credit database, each record contains more than 200 credit variables that illustrate consumer credit usage and performance. Since 1992, TransUnion has been aggregating this information at the county, Metropolitan Statistical Area (MSA), state and national levels.
As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive data and advanced analytics and decisioning. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion employs associates in more than 25 countries on five continents. www.transunion.com/business