Auto loan delinquencies rose in the first quarter even as U.S. consumers continue to prioritize car payments over mortgages and credit cards, data from TransUnion show.
The average auto loan balance per borrower rose 1.8 percent in the first quarter to $18,386, according to TransUnion's Industry Insights Report released last week. The auto 60-day delinquency rate, driven by poor subprime and near-prime loan performance, rose to 1.3 percent in the quarter, up from 1.2 percent a year earlier.
Originations have also slowed as a result of a pullback on subprime loans, Brian Landau, senior vice president and automotive business lead at TransUnion, told Automotive News. The market is recalibrating a bit, he said.
"There was a lot of growth in the last few years. A lot of that was attributed to the growth of subprime, and there may have been an overextension. But our belief is that the risk was accounted for in the price itself for those subprime borrowers," he said.
"You saw a lot of lenders dabbling in the subprime space, competing with the dedicated, subprime specialty finance companies as well as the buy-here, pay-here dealers. With the uptick in delinquencies around subprime and near-prime borrowers, you are seeing a retraction there," Landau said.
Still, Landau said, while delinquency rates overall are inching toward recession levels, auto loan delinquency rates never reached the levels that credit cards and mortgages did.
In the third quarter of 2009, amid the recession, the average auto delinquency rate was 1.46 percent. Compare that with 1.3 percent through March this year.
"The industry is pretty robust," he said. "It's been able to survive that type of turmoil. It's not as volatile as you would see, let's say, in mortgage."
Regardless, though, "with flatter sales volumes and higher delinquencies, we anticipate lenders will evaluate their credit policies for subprime and near-prime borrowers to calibrate for the uptick in delinquencies," Landau said.