Late Auto Loan Payments Increase

money on a past due notice
A recent report from TransUnion shows that delinquency rates for car debt have increased.

In 2012, the number of delinquent auto loans rose from 0.33 percent in the second quarter to 0.38 percent in the third quarter. Debt payments are considered delinquent after 60 or more days past the due date.

Even though this is a relatively low rate of delinquency, the amount of outstanding car debt that borrowers had from banks still increased. In the third quarter of 2011, the amount stood at $12,902, but by the third quarter of 2012, that figure rose by five percent to $13,571, according to TransUnion.

“Since TransUnion began tracking the auto loan delinquency rate in 1999, we have observed a seasonal increase in this variable every year between the second and third quarters. This has occurred even with auto loan delinquencies dropping 56 percent since the recession high of 0.86 percent set in the fourth quarter of 2008. Seasonal factors include consumers balancing increased spending due to back to school needs and holiday purchases,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit, in a press release.

In the space of a single quarter, from the second quarter of 2012 to the third quarter of 2012, 38 states saw increases in delinquency rates. Fortunately, the amount of car loan originations increased by 16 percent in the second quarter of 2012 compared to the second quarter of 2011. The number of non-prime high risk borrowers who were delinquent in their payments increased from 30.2 percent in the second quarter of 2011 to 32.8 percent in the second quarter of 2012.

TransUnion officials remain optimistic in the wake of recent statistics that show economic recovery and an improved outlook.

“With increased auto loan balances and more loans going to non-prime borrowers, it is plausible that some pressure may be placed on the auto loan delinquency rate. However, as the economy continues to improve and new and used auto demand maintains its current pace, we believe that the auto loan delinquency rate will either remain the same or even drop a few basis points by the end of the year,” said Turek.

TransUnion compiles its data from consumer information, unemployment rates, economic assumptions, and interest rates. The data that TransUnion analyzes is composed of 27 million anonymous consumer records.