2 expectations as TransUnion releases latest auto finance report

TransUnion senior vice president and automotive business leader Brian Landau sees used-vehicle financing continuing to be one of the primary ingredients filling provider portfolios for the rest of the year, especially after reviewing the latest auto data contained in TransUnion’s Q4 2018 Industry Insights Report.

After a steep decline in originations during the third quarter of 2017, TransUnion reported on Thursday that originations grew by 0.5 percent year-over-year in Q3 2018, with above prime consumers leading the growth. TransUnion reiterated that originations are viewed one quarter in arrears to account for reporting lag.

While subprime saw a slight 1.7 percent year-over-year increase in originations, TransUnion pointed out that the origination mix continues to shift toward the above prime segments, with prime plus and super prime share together increasing 0.9 percent year-over-year.

The report also noted total balances grew at a slowed rate of 4.6 percent year-over-year, the lowest Q4 year-over-year increase since 2011. Delinquencies have remained stable with little to no change across most risk tiers, according to TransUnion.

“Our financing model has given us valuable insight into the auto finance market and as such, we expect demand for new-vehicle loans to continue to soften in 2019,” Landau said in a news release that accompanied the latest report.

“Even as lenders continue to make credit available to subprime borrowers, we expect them to balance this demand and anticipate originations to flatten,” he continued.

“However, steady delinquency rates continue to highlight the underlying positive health of the auto-finance market despite potential headwinds such as auto tariffs and additional interest rate increases,” Landau went on say.

SubPrime Auto Finance News followed up with Landau for further insight into what might happen as the rest of the year unfolds.

“Many of the pundits expect new-vehicle sales in 2019 to decline slightly year-over-year,” he said during a phone conversation. “That is going to drive more lenders to other options such as used vehicles and used-vehicle financing. What we’re already hearing is there’s going to be more competition. I don’t believe lenders will be pulling back in auto. I think there’s going to be more competition going forward.

“They’re opening up the aperture and expanding a little bit, because loan performance has improved but doing it in a judicious manner. They’re starting to see more competition because many other lenders are doing the same right now,” Landau continued.

“I don’t see finance companies retreating or pulling back, but competition is going to increase,” he added.

*Note: Originations are viewed one quarter in arrears to account for reporting lag. Source: TransUnion