It’s no secret that the auto finance industry is taking its collective foot off of the origination accelerator. In fact, TransUnion now has seen originations soften on a year-over-year basis for four quarters in a row.
Displayed one quarter in arrears, TransUnion’s recently released Industry Insights Report indicated that originations declined by 2.2 percent between Q2 2016 and Q2 2017.
Analysts explained the decline was driven by a 5.9-percent drop in subprime, near prime and prime contract openings. They added this downward movement was partially offset by a 3.2-percent rise in originations to the least risky consumers in the prime plus and super prime risk categories over the same time period.
As a result of this shift, TransUnion pointed out that 2.3 points of market share have shifted from subprime, near prime and prime to prime plus and super prime.
While overall auto-finance balances rose 5.9 percent between Q3 of last year and Q3 of this year, the development marked the lowest year-over-year growth rate since Q3 2012. As balance growth slowed, analysts mentioned serious auto finance delinquency rates — contracts more than 60 days past due — rose 7 basis points in the last year to close the third quarter at 1.40 percent.
“Though serious auto loan delinquency rates are slowly rising, we still do not believe this is a cause for concern,” Brian Landau, senior vice president and automotive business leader at TransUnion, said. “The recent uptick in delinquencies was driven primarily by ‘relaxed’ underwriting standards from recent years, which drove non-prime origination growth.
“The recent decline in originations is due to the tightening of underwriting requirements and the slowing demand for new vehicles,” Landau continued. “Despite fewer originations, there is evidence that more people will be opening auto loans in the near term.
“In September, U.S. light vehicle sales increased for the first time this year on an annual basis. Also, there will likely be several thousand new vehicles purchased as a result of the hurricanes in Florida and Texas,” he went on to say.
|Metric||Q3 2017||Q3 2016||Q3 2015||Q3 2014|
|Number of Auto Loans||78.6 million||74.8 million||69.8 million||64.6 million|
|Borrower Level Delinquency Rate (60+ DPD)||1.40%||1.33%||1.19%||1.20%|
|Average Debt Per Borrower||$18,567||$18,361||$17,946||$17,351|
|Prior Quarter Originations*||7.1 million||7.3 million||7.2 million||6.8 million|
|Average Balance of New Auto Loans*||$20,653||$20,436||$20,097||$19,524|
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
|Age/Variable||60+ DPD||Annual Pct. Change||Average Loan Balances Per Consumer||Annual Pct. Change|
|Gen Z (1995 – present)||1.86%||7.0%||$13,796||2.8%|
|Gen X (1965-1979)||1.59%||3.0%||$20,798||1.9%|
|Baby Boomers (1946-1964)||0.86%||5.2%||$18,514||0.6%|
|Silent (Until 1945)||0.76%||9.2%||$14,608||-1.4%|