TransUnion: Strong Auto-Loan Performance To Continue Next Year

Auto-loan delinquencies will remain at record lows next year, spurring more competition among lenders looking to expand their business, credit bureau TransUnion predicts.

The national auto delinquency rate is expected to rise to 0.51% in the fourth quarter from 0.47% in the third quarter, TransUnion said Wednesday. But the rate, which measures borrowers who are at least 60 days late on a payment, is expected to fall in the first half of 2012 before leveling out at 0.51% in the fourth quarter of next year.

The rate had reached 0.86% in the fourth quarter of 2008.

The strong performance is due in part to changes lenders made after the recession to tighten underwriting standards, said Peter Turek, automotive vice president at TransUnion.

Many of "the loans that are on the books were made during the credit crisis to consumers that had better-than-average credit," Turek said.

Several banks have said auto lending is an important focus for them going forward, noting competition for borrowers has grown as lenders look to take advantage of increasing demand.

"It gives lenders more confidence to go out into the market and maybe look at new programs and expand lending," Turek said.

Capital One Financial Corp. (COF), which has been making a bigger push in the auto-lending business, has experienced more competition but sees "a lot of continuing opportunity" in the market, Chairman and Chief Executive Richard Fairbank told analysts in October.

The McLean, Va., bank's average auto loans in the third quarter grew 14% from a year earlier to $19.8 billion.

As much as 75% of new-vehicle sales are financed, and with sales expected to rise next year, the ability for banks to increase auto lending will rise, Turek said.

There were 994,176 new vehicles sold in November, up 13.9% from a year earlier, according to Edmunds Inc.

Increased sales have led to higher loan originations. Quarterly loan originations, as measured by number of loans, have risen 8.4% in the last year, according to TransUnion, which did not make the number of loans or origination amounts available.

The volume of new auto loans originated through September was $280.5 billion, up 14.9% from a year earlier, according to credit bureau Equifax.

-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; [e-mail]