The deceleration of auto-finance origination stopped in this first quarter, according to TransUnion’s newest Industry Insights Report released earlier this week. But the subprime segment didn’t trigger the change.
After six consecutive year-over-year declines beginning in third quarter of 2016, analysts found that auto origination volume turned positive in Q1 of this year. Because originations are viewed one quarter in arrears to account for reporting lag and to ensure all accounts are included in the data, TransUnion indicated origination volume increased 0.9 percent to 6.79 million contracts, up from 6.73 million in Q1 2017.
However, finance companies didn’t take on more risk to stop the string of origination sags. TransUnion determined that growth was driven by a 3.0-percent yearly increase in prime plus and super prime originations.
Turns out, that the subprime segment experienced an annual decline of 3.3 percent, according to TransUnion’s information.
Analysts also explained tighter underwriting during the past few quarters appears to be positively impacting the 60-plus days past due delinquency rate.
After growing from 1.11 percent in Q2 2016 to 1.23 percent in Q2 2017, TransUnion pointed out the trend has remained flat, landing at 1.22 percent in Q2 of this year. This reading marks the third quarter in a row in which year-over-year delinquency rates have remained stable.
“We expect this shift in origination mix from lower credit tier consumers to higher credit tier consumers to continue through the end of the year as lenders look to reduce portfolio risk,” said Brian Landau, senior vice president and automotive business leader at TransUnion. This will likely result in continued stabilization in the delinquency rate.
“We expect to report higher Q2 auto loan originations next quarter, as new-car sales continue an upward trend through the second quarter,” Landau continued. “We also anticipate that an increase in used-car purchases, spurred by the shift toward lower-risk auto borrowers, may dampen new-car sales through the rest of 2018.
“The recently announced import tariffs on steel and aluminum are something to monitor, as they may have a minor impact on vehicle prices and consequently, on originations,” he went on to say. “However, we do not expect this, or any other non-credit factors, to have an outsized impact on the industry.”
Editor’s note: More data and analysis from TransUnion’s newest Industry Insights Report will be included in future reports from Auto Fin Journal and SubPrime Auto Finance News.
|Auto Lending Metric||Q2 2018||Q2 2017||Q2 2016||Q2 2015|
|Number of Auto Loans||80.9 million||77.4 million||73.3 million||67.9 million|
|Borrower-Level Delinquency Rate (60+ DPD)||1.22%||1.23%||1.11%||1.00%|
|Average Debt Per Borrower||$18,700||$18,486||$18,177||$17,699|
|Prior Quarter Originations*||6.8 million||6.7 million||6.9 million||6.5 million|
|Average Balance of New Auto Loans*||$20,901||$20,415||$20,013||$19,695|
*Note: Originations are viewed one quarter in arrears to account for reporting lag and ensure all accounts are included in the data.
|Generation||60+ DPD||Annual Pct. Change||Average Loan Balances Per Consumer||Annual Pct. Change|
|Gen Z (1995 – present)||1.59%||-1.2%||$14,107||+ 3.1%|
|Millennials (1980-1994)||1.57%||-1.9%||$17,853||+ 2.3%|
|Gen X (1965-1979)||1.37%||-2.8%||$21,031||+ 1.8%|
|Baby Boomers (1946-1964)||0.77%||-1.3%||$18,536||+ 0.5%|
|Silent (Until 1945)||0.70%||+2.9%||$14,514||- 1.8%|