CHICAGO -

The latest TransUnion data gives crystal clear evidence to show just how much the auto-finance market has grown during the past three years.

Analysts reported 2016 closed with 75.8 million contracts in portfolios. By the close of this past year, TransUnion discovered that figure of outstanding contracts grew to 83.8 million.

When asked to offer perspective, TransUnion senior vice president and automotive business leader Satyan Merchant replied, “It shows to me that we have a continued trend in the industry of consumers financing their auto purchases. It’s particularly showing up on the used side where consumers are seeking financing.

“People are taking out loans that stay on the books longer,” Merchant continued during a phone conversation with SubPrime Auto Finance News. “It’s not as if a consumer is financing a vehicle and paying it off in one or two years. These loans are staying on the books longer and longer.”

TransUnion reported earlier this month that 7.5 million contracts filled portfolios during the third quarter, representing a rise of 4.3% year-over-year. Analysts are still compiling the Q4 origination tally as there is a lag in reporting from providers. Still Merchant noted, “The story of Q4 2019 is really about a bounce back in the resiliency of originations.”

Elaborating about those 7.5 million new accounts recording during Q3, Merchant added, “That’s the large amount we’ve seen in quite some time. The last time we saw a number that large was back in 2016, which was one of our peak vehicle sales years in the industry.”

TransUnion’s Q4 2019 Industry Insights Report showed the average new account balance grew to $22,232, a 3.3% uptick over the same period last year. A combined analysis with IHS Markit, using a newly introduced business intelligence tool, Catalyst for Insight — Credit Module, found that account balances grew as consumers continued to move from cars to more expensive trucks and SUVs.

Analysts noticed trucks and SUVs grew to 71% of new financed vehicles and 60% of used financed vehicles in Q3 2019, compared to 68% and 57%, respectively, in Q3 2018. To help offset climbing costs, consumers across all risk tiers are entering the used-vehicle market in growing numbers.

TransUnion indicated the proportion of used financed vehicles versus new is large and growing, with a 53%/47% used/new split in Q3 2019.

“Not only are vehicles lasting longer, an increase of inventory to the used car marketplace has supply aligning with growing consumer demand,” Merchant said.

“Used vehicles can be an attractive alternative for consumers, especially those who are in the market for pricier vehicles such as a truck or SUV. On average, they can save approximately $13,000 by opting for a used vehicle over a new one,” he continued.

As consumers continue to pursue manageable monthly payments, TransUnion reported contract terms have lengthened for both new and used vehicles.

New-model financing terms grew moderately to 69 months in Q3 2019 versus 68 months a year earlier. Analysts explained this trend has helped slow monthly payment growth to 3.6% year-over-year with an average monthly payment for new-vehicle financing at $561 in Q3 2019, up from $542 in Q3 2018.

Analysts pointed out terms have also lengthened for used vehicles, growing from 63 months in 2018 to 64 months in 2019. The lengthened terms for used vehicles has slowed the rate of growth for monthly loan payments to 3.0% year-over-year, bringing the average used monthly payment to $389.

And as the amount financed and terms have increased, TransUnion noticed average loan-to-value (LTV) at origination has inched up. Used LTVs grew to 112.2 from 109.4 a year earlier, while new LTVs grew to 100.0 from 99.6 a year earlier.

With all of this growth, TransUnion highlighted an important element — performance has remained relatively strong.

Analysts determined the delinquency level of contracts 60 days or more past due increased to 1.50% in Q4 2019, up from 1.44% in Q4 2018 and 1.43% in Q4 2017. They emphasized that delinquency rates continue to be well-managed even as average balances rise.

“External factors may have put pressure on the affordability crunch in the auto industry, but it has not put a damper on consumer appetite for credit,” said Matt Komos, vice president of research and consulting in TransUnion’s Financial Services business unit.

“As a result, consumers are taking control of their financial situations and weighing their financing options. We anticipate growth to continue in the used financing sector of the market as consumers pursue pricing that is a bit more palatable and offers a more manageable monthly payment,” Komos went on to say.