TransUnion: Auto Loan Growth Driven by Millennial Originations
CHICAGO — The millennial generation is the fastest-growing segment of auto loan consumers, according to TransUnion’s latest auto report. Millennials — consumers born in 1981 or after — represented 27% of total auto loan originations in 2014, up from 16% of total originations in 2009.
Millennials’ total outstanding auto balances have increased 23% in the past year, the highest of any age group. Average opening loan balances for this generation grew 4.1% year over year, up from $17,942 in 2013 to $18,678 in 2014.
“The growth in millennials’ auto loan originations dispels the common myth that millennials are not buying cars,” said Jason Laky, senior vice president and automotive business leader for TransUnion. “The growing average loan balances for millennials, combined with stable delinquency rates, indicate that we are still in the midst of a strong auto lending environment.”
At the end of 2014, auto loan delinquency rates remained relatively flat, with the 60-day auto loan delinquency rate moving from 1.14% in Q4 2013 to 1.16% in Q4 2014. The account-level and consumer-level delinquency rates were unchanged from the prior quarter. Auto loan debt per borrower rose to $17,453 in Q4 2014, marking the 15th straight quarter of increases.
Auto loan delinquency rates increased in 27 states on a year-over-year basis, with the largest moves coming in Arkansas (up 15.7%) and Nebraska (up 10.5%). The largest declines occurred in Oklahoma (down 18.6%) and Alaska (down 16.1%).
Auto loan debt per borrower rose 4.1% from $16,771 in Q4 2013 to $17,453 in Q4 2014. On a quarterly basis, auto loan debt increased from $17,352 in Q3 2014. Auto loan balances rose in every state between Q4 2013 and Q4 2014. States experiencing the largest increases in auto loan debt included New Mexico (up 6.7%), Texas (up 5.8%) and Georgia (up 5.5%).
TransUnion recorded 64.8 million auto loan accounts as of Q4 2014, up from 60.5 million in Q4 2013. Viewed one quarter in arrears (to ensure all accounts are included in the data), new account originations increased to 7 million in Q3 2014, up 5.1% from Q3 2013. Of the new auto trades, approximately 1 million were concentrated within the subprime tier (those consumers with a VantageScore 3.0 credit score lower than 601), essentially flat from Q3 2013. Prime or higher tiers (those consumers with a VantageScore 3.0 credit score higher than 660) represented 64% of new auto trades, also flat relative to Q3 2013. The subprime delinquency rate increased from 5.72% in Q4 2013 to 5.92% in Q4 2014.
“Access to credit is expanding for American consumers, especially in the non-prime and subprime risk tiers” said Laky. “Lenders are apparently taking advantage of a strong economy and robust auto market to find profitable lending opportunities beyond the limits of traditionally low-risk credit tiers. And given the fact that delinquency levels remain near historic lows, that strategy appears well justified.”
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