Delinquency rates of auto loans historically low

Auto Loan Delinquency Data

As the housing market recovers and more customers are able to purchase major investments, banks are catching on and providing the necessary loans to help this trend continue. In particular, the strength of the auto loan industry has helped many banks gain profits as well as provide solvency to the overall economy. A new study released by TransUnion, a credit reporting agency, found that delinquency rates of auto loans have hit all-time lows – and banks may be increasing their auto loan business as a result.

TransUnion reported that the national auto loan rate in the fourth quarter of 2012 was 0.41 percent, compared to 0.46 percent in the fourth quarter of the year earlier. While a bit higher than the 0.38 percent recorded in the third quarter of the year, the overall decrease annually points to a strengthening auto market – and a strengthening economy.

What was also notable was that the number of subprime borrowers increased as well, pointing to more confidence in the banking industry.

“We’ve been observing an increase in sub-prime borrowers in the auto loan space now for several quarters and we do expect this will eventually push the overall delinquency numbers higher,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit in a press release. “New loan originations are growing and that has helped the 60 day or more delinquency rate remain low, and we forecast that delinquencies will remain about the same in the first quarter, possibly even dropping slightly.”

While this is positive news overall, banks should also remain cautious and prepared for an increase in applications. With risk management software, lenders can continue making the loans that are contributing the economic recovery, but at the same time, remain confident that borrowers are qualified.

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