As Consumers’ Monthly Debt Loads Increase, Auto Lenders Must Adapt to Manage Risk, Increase Originations
27 Juin 2024 - 2:00PM
A new TransUnion (NYSE: TRU) study released today found that
consumer affordability challenges and tighter lending restraints
are impacting new vehicle originations across the auto industry.
The study, Originating Auto Loans With Confidence, explored
trends in auto originations, consumer savings, debt burdens and
credit scores in the pandemic era, as well as in the years before
and after. The study also looked at consumer performance in the
auto market, particularly at a time when overall consumer
performance is beginning to see some measure of deterioration. In
addition, the study explored potentially valuable credit models
that may offer lenders an opportunity to increase slumping
originations in a risk-appropriate manner.
With the exception of a brief post-lockdown spike in 2021, auto
lenders have seen consistent year-over-year (YoY) declines in auto
originations in the quarters since the start of the pandemic
period. Supply shortages fueled these declines in 2021 and 2022.
However, as inventories have normalized, affordability and
increasingly squeezed consumer budgets have now become the driving
factors in a continued sluggish auto origination market.
“Just as auto inventories began to recover from the worst of the
pandemic era supply chain shortages, elevated inflation and higher
interest rates that followed have put consumers in a tight
financial bind,” said Jason Laky, executive vice president and head
of financial services at TransUnion. “As a result, many have been
taking on additional and larger monthly payments each month to
service higher debt levels. This has likely contributed to some
consumers holding off on buying or leasing a new auto.”
When examining the current monthly debt burden of consumers with
auto loans, the study found that the average monthly debt for those
consumers increased by nearly 20% over the past two years, with
average monthly debt payments increasing steadily between Q1 2022
($1,345) and Q1 2024 ($1,583). This is nearly double the CPI growth
that occurred over the same period.
Total Monthly Credit Debt Payments Among Auto
Borrowers Have Been Steadily Increasing
|
Q1 2018 |
Q1 2019 |
Q1 2020 |
Q1 2021 |
Q1 2022 |
Q1 2023 |
Q1 2024 |
Auto |
$470 |
$478 |
$487 |
$493 |
$512 |
$545 |
$581 |
Mortgage |
$634 |
$643 |
$639 |
$612 |
$618 |
$686 |
$719 |
Bankcard |
$145 |
$161 |
$172 |
$151 |
$162 |
$205 |
$216 |
Personal Loan |
$42 |
$47 |
$53 |
$49 |
$53 |
$62 |
$67 |
Total |
$1,291 |
$1,329 |
$1,351 |
$1,305 |
$1.345 |
$1,498 |
$1,583 |
Source: TransUnion Consumer Credit
Database
Delinquencies Tick Up Among Auto Borrowers
The study also found that delinquencies are on the rise among
auto borrowers. This is likely in no small part due to the
increased debt load mentioned above, along with the broad effects
of inflation. Auto delinquencies 60 or more days past due (60+ DPD)
increased to 1.33% in Q1 2024, up from 1.19% one year prior. The
study also found that those consumers who saw the highest credit
score migration increases in the 2022 period were at the greatest
risk of falling 60+ DPD at least once in the following 15 months.
The term credit score migration is applied to consumers who had
traditionally found themselves with a higher or lower credit score
yet saw their score uncharacteristically increase or decrease over
the course of the period mentioned above.
Among Q3 2022 originations, those consumers who were high
migrators, or saw significant score increases, in the period prior
to their origination were significantly more likely to fall 60+ DPD
in that 15-month period following. Among that group, 4.36% fell 60+
DPD during that time period, compared to 2.34% of low migrators and
2.11% of negative migrators.1 This has been a driving factor in the
tightening of underwriting standards among auto lenders, and three
consecutive YoY originations declines from Q4 2021 to Q4 2023.
“As we are continuing to see auto payments steadily increasing
faster than incomes, this is placing pressure on consumers across
the credit risk ranges when controlled for risk tier, but in
particular, among consumers with below prime credit,” said Satyan
Merchant, senior vice president of auto and mortgage line of
business leader at TransUnion. “This is something that bears
continued monitoring by lenders, and those lenders should consider
making further adjustments, potentially through the use of
alternative and trended data, as necessary.”
Merchant continued, “While in normal times it may suffice for
auto lenders to continually monitor their underwriting risk models
for stability and accuracy, in a more unsettled lending
environment, such as that in which we find ourselves today, that
may simply not be enough. Lenders should consider additional
measures to stimulate originations more confidently and maintain
growth. These measures can include conducting retrospective and
lost sales analyses, tracking and monitoring performance across
sample populations, and overlaying blended scores to create dual
score strategies.”
To learn more about how TransUnion TruVision attributes and
alternative data can help lenders rebuild underwriting and
strategies, click here.
About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company with
over 13,000 associates operating in more than 30 countries. We make
trust possible by ensuring each person is reliably represented in
the marketplace. We do this with a Tru™ picture of each person: an
actionable view of consumers, stewarded with care. Through our
acquisitions and technology investments we have developed
innovative solutions that extend beyond our strong foundation in
core credit into areas such as marketing, fraud, risk and advanced
analytics. As a result, consumers and businesses can transact with
confidence and achieve great things. We call this Information for
Good® — and it leads to economic opportunity, great experiences and
personal empowerment for millions of people around the world.
http://www.transunion.com/business
1 High Migrators: score change >= 46 pts, measured 27mo
and 3mo before origination;
Low Migrators: score change between -20 and +45 pts,
measured 27mo and 3mo before origination;
Negative Migrators: score change of <= -21 pts,
measured 27mo and 3mo before origination.
Contact |
Dave BlumbergTransUnion |
|
|
E-mail |
dblumberg@transunion.com |
|
|
Telephone |
312-972-6646 |
TransUnion (NYSE:TRU)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024
TransUnion (NYSE:TRU)
Graphique Historique de l'Action
De Juil 2023 à Juil 2024