Serious delinquencies — loans 60 days or more past due — are expected to increase at a slower pace than in recent years, as TransUnion is predicting a three-basis-point rise by yearend 2018, compared with where the rate is now.
The industry delinquency rate is looking to have a roller coaster year in 2018 as TransUnion predicts the rate could drop as much as 20 basis points by midyear, before rising again above 2017 levels.
The delinquency rate is projected to rise to 1.46% in the fourth quarter, compared with 1.43% during the same period the year prior, according to TransUnion.
“On the margin, I think it’s pretty net neutral in the rise from 2016 to 2017,” Brian Landau, senior vice president and auto group leader at TransUnion, told Auto Finance News.
Despite a slowing rate of increase, the industry should still prepare for higher delinquencies in 2018.
“The book of delinquencies, especially in nonprime, is pretty much slowing down,” he said. “Those originated loans in 2017 are not going any more delinquent than they were [in previous vintages].”
Rather, Landau said the increase is due to new players entering the subprime space.
“The recalibration happened in 2017, and in 2018 you may see some more expansion,” he said. “Some lenders are flocking [to subprime] because there is less competition. Buy-here-pay-here dealers are doubling down.”