Loan Balance Growth Rates Slow as Lenders Tighten Underwriting

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Industry-wide outstanding auto loan balances increased 5.9% in the third quarter, from the same time a year prior — marking the lowest year-over-year growth rate since the second quarter of 2012, according to TransUnion’s latest consumer finance trends webinar.

“While nonprime consumers continue to have access to credit in the auto market, their balance growth has been lower than above prime consumers,” TransUnion noted in the webinar. “Overall, there appears to be some tightening in underwriting in the subprime, near-prime, and prime risk tiers over the past year.”

Additionally, the percentage of borrowers 60-plus days past due reached 1.4% in the third quarter, up from 1.3% in 3Q16. The rate marks the highest level observed since the third quarter of 2009. However, “these increases do appear well managed and are as expected,” according to TransUnion. “We still do not believe this is a cause for concern.”

Also of note, average auto loan amounts continue to rise. “Amounts financed today are far higher than 2005 and 2006 as the cost of auto [vehicles] continue to rise,” TransUnion noted. The average amount financed reached $20,500 in the third quarter, up from $17,500 in 2005.

 

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