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TransUnion: Late auto-loan payments rose in 4Q

By ALEX VEIGA Published: February 26, 2013

All told, the auto-loan delinquency rate has fallen on an annual basis for 13 consecutive quarters.

The trend has held up even as Americans have been taking on higher levels of auto-loan debt.

In the fourth quarter, bank auto debt per borrower increased for the seventh consecutive quarter, rising 5.4 percent to $13,747 from $13,045 a year earlier, TransUnion said.

One reason for that is that banks are making more auto loans, which tend to have higher balances early on, as it typically takes several years for borrowers to pay them down.

TransUnion's analysis of data on new auto loans lags by a quarter, so the most recent figures are for the third quarter. In that period, new auto loans and leases grew nearly 16 percent from the same quarter in 2011.

The rise in auto sales also has spurred banks to step up lending to borrowers with less-than-stellar credit.

Some 32.4 percent of new auto loans issued in the July-September period were made to nonprime borrowers, up from 30.6 percent a year earlier. Non-prime borrowers are defined as those with a score between 501 and 700 on the VantageScore credit scale, which runs between 501 and 990, with borrowers scoring at 900 or above being considered prime borrowers, or the safest credit bet.

The average balance of new auto loans also increased on an annual basis in the third quarter, rising about 1.7 percent to $18,326, the firm said.

“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,” Turek said.

Given the rise in auto loans going to higher-risk borrowers, Turek said he expects that the trend will eventually drive the overall late-payment rate for auto loans higher. But he anticipates that the delinquency rate will remain about the same in 2013's first quarter, possibly even dropping slightly.

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