Auto loan delinquencies hit their lowest levels in the United States

Article by Christian Andrei, on August 23, 2012

Credit bureau TransUnion said that customers have increased their borrowing and there are fewer incidences of these customers falling behind on their payments; however, he doesn’t expect the record-low delinquencies in the U.S. to last. Peter Turek, the automotive vice president for TransUnion’s financial services business unit, said that delinquencies will probably increase in the second half of 2012 but will stay at low levels. A similar opinion was given last week by Melinda Zabritski, director of automotive lending for Experian Automotive. They both say that delinquencies are low even with an increase in subprime borrowing but that eventually the increase in subprime will result to an increase in delinquencies.

TransUnion said that delinquencies of 60 days or greater (which have the most likelihood of being written off) reached a record low in the second quarter of 2012, for the second quarter in a row. TransUnion has been monitoring the information since 1999. TransUnion said that the delinquency rate for the second quarter of 2012 was 0.33%, representing a decline from 0.36% in the first quarter of this year.

Year over year, auto loan delinquencies fell by 25% from 0.44% in the second quarter of 2011. Turek released a written statement to cite a TransUnion study made earlier this year that determined that since the recession, consumers that had difficulty paying all their bills are placing their car payments ahead of mortgage or credit card debt since they have to get their cars to get to work and keep their jobs. Turek told Automotive News this year that mortgages came first in the previous downturns. Furthermore, since used-car values are strong, customers aren’t as likely to be upside-down in their auto loans (owing more than the car’s value). Turek said that this is an added motivation for customers to keep their auto loan current. [source: Automotive News - sub. required]

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