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 in 2011. This is according to TransUnion and its 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.
Although auto delinquencies were expected to fall since last quarter in part due to seasonal influences, the Q2 2011 TransUnion data released today shows a moderate deceleration on a year-over-year basis since the third quarter of 2010.
“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. 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 of 2011, 43 states experienced declines in their auto delinquency rates. On a more granular level, 60% of metropolitan statistical areas (MSA) saw declines in their delinquency rates last quarter. During the first quarter of 2011, 64% of MSAs experienced a decline in auto delinquency rates compared to only 49% in 4Q10.
“Today, national auto delinquency rates are at historic lows, at half the levels found in credit card nonpayment rates and over ten times lower than seen in the mortgage sector,” added Turek. “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 various 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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