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TransUnion: Auto Loan Debt, Late-Payment Rate Up in Q4

Posted on February 27th, 2014

ride today loans 53In the last quarter of 2013, car owners in the U.S. not only had more auto loan debt but also made more late payments. This is according to the data released by TransUnion a few days ago.

The credit reporting agency’s figures revealed that car owners carried higher auto loan balances in the last three months of 2013. Auto loan debt per borrower in Q4 was $16,769, up 4.4 percent from last year. This is the 11th quarter in a row to report an increase in auto loan debt. The Q4 rate is also higher than the Q3 rate by 0.5 percent.

Increase in auto loan debt is attributed to better auto sales. 2013 was considered the U.S. auto industry’s best year since 2007 and the fourth consecutive year where sales rose by over 1 million. New car and truck sales last year were at 15.6 million.

More people were compelled to buy autos last year due to low interest rates, availability of credit, as well as steady gas prices. The first two reasons in particular encouraged consumers to take on more car debt than usual. Auto loan debt increased because new car loans usually have bigger balances in the beginning.

While carrying higher existing loan balances, car owners continued to make timely payments. TransUnion data showed that in the end of the last three months of 2013, the auto loan delinquency rate was at 1.14 percent. From a historical viewpoint, this is low: 1.3 percent is the average late-payment rate for every Q4 since 2007.

The auto loan delinquency rate dropped, but the late-payment rate advanced. In Q4, late auto loan payments (60 days or more) rose to 1.14 percent. The rate is higher compared to 2013′s Q3 and 2012′s Q4 rates, which are 1.04 and 1.09 respectively. The late-payment rate for subprime borrowers also increased. From 5.7 percent in the October to December 2012 period, it jumped to 6.1 percent.

The increase in late-payment rate was expected, as it is recognized as a ‘seasonal trend.’ Consumers purchase a lot of gifts during the holidays and excessive purchases often hurt their budgets. When they have less money to work with, consumers often delay debt payment. It is important to note that auto loan payments are not the only financial obligations consumers put off when budget is limited—late -payment rates for mortgages and credit cards also climb in Q4.

However, consumers get back on paying track when the holidays are over. Thanks to income tax refunds, borrowers can return to making timely payments in the start of the new year. This is the reason TransUnion expects auto loan delinquency to further decrease in 2014′s first quarter.

As per TransUnion’s figures, there are 60.5 million auto loan accounts in the October to December 2013 period. In the same period in the previous year, loan accounts were at 57 million. New auto loans issued in the third quarter of 2013 was 11 percent more than the previous year at 6.6 million. 32.5 percent of these new auto loans were granted to non-prime borrowers, a slight jump from the prior year’s 32.4 percent.

Photo credit: Flickr/ CC BY


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