TransUnion sees auto loan and rental volume rebound
The TransUnion credit bureau expects auto loan and rental volume to recover in the first half of 2021 and a roughly stable environment for auto finance defaults in the coming year.
“We expect a slight rebound” in volume, said Matt Komos, vice president of research and consulting at TransUnion, in a recent webinar.
Specifically, TransUnion expects automatic creations of about 6.9 million accounts in the first quarter of 2021, up about 8% from a year ago. TransUnion’s forecast for the second quarter of 2021 is 7.4 million accounts, an increase of 14.6% from the 2020 low. Totals include loans and leases, new and used.
However, TransUnion is not making its usual accurate forecast for auto failures for this time of year, due to economic uncertainty over the lingering effects of the coronavirus.
“We saw an improvement over the dark days in April, but we still see high unemployment,” Dan Simmons, director of research and consulting, told the webinar.
“We may be looking at other stimulus measures, but that remains to be seen.”
It is also unclear how quickly the new coronavirus vaccine is reaching a significant portion of the population, he says.
Adding to the uncertainty, Komos points out that different categories of debt interact with each other in the same household. For example, he says 1.8% of consumers with auto debt have a mortgage that is temporarily in “forbearance” status until April and May due to the pandemic.
“How are these consumers going to behave when their mortgage loan forgiveness ends?” ” he asks. “We’re definitely going to have some pressure on delinquency.”
That said, Komos says he expects auto lenders in 2021 to stick to a trend that started before the pandemic: cutting lending to riskier subprime credit customers. “We expect things (delinquency) to be relatively stable, after rising slightly at the end of this year,” he says.
A year ago, TransUnion forecast that late payments of more than 60 days in Q4 2020 would account for about 1.44% of overdue accounts, up from 1.47% in 2019.
That may turn out to be about right, even if no one predicted the pandemic. For the third quarter of 2020, TransUnion reports that the 60-day auto loan default rate was 1.45%.