Auto Market Shows Resiliency as Originations Grow

CHICAGO, Feb. 12, 2020 (GLOBE NEWSWIRE) -- Despite rising concerns surrounding auto affordability, loan originations grew at their highest quarterly rate in four years. TransUnion’s newly released Q4 2019 Industry Insights Report found that auto originations grew at a rate of 4.3% year-over-year in Q3 2019, adding 7.5 million new accounts. The Report also found that the used vehicle market is leading this growth.

Overall, the average new account balance grew to $22,232, a 3.3% uptick over the same period last year.  A combined analysis with IHS Markit, using a newly introduced business intelligence tool, Catalyst for Insight – Credit Module, found that account balances grew as consumers continued to move from cars to more expensive trucks and SUVs. Trucks and SUVs grew to 71% of new financed vehicles and 60% of used financed vehicles in Q3 2019, compared to 68% and 57%, respectively, in Q3 2018. To help offset climbing costs, consumers across all risk tiers are entering the used car market in growing numbers. The proportion of used financed vehicles vs. new is large and growing, with a 53%/47% used/new split in Q3 2019.

The Percentage of Used Financed Vehicles Continues to Grow

 

Vehicle Type
Q3 2019Q3 2018Q3 2017Q3 2016Q3 2015
 

New
 

46.7


%
 

47.1


%
 

47.3


%
 

48.1


%
 

48.0


%
 

Used
53.3%52.9%52.7%51.9%52.0%

*Source: TransUnion (TRU) consumer credit database; IHS Markit Catalyst for Insight-Credit Module

“Not only are vehicles lasting longer, an increase of inventory to the used car marketplace has supply aligning with growing consumer demand,” said Satyan Merchant, senior vice president and automotive business leader at TransUnion (TRU). “Used vehicles can be an attractive alternative for consumers, especially those who are in the market for pricier vehicles such as a truck or SUV. On average, they can save approximately $13,000 by opting for a used vehicle over a new one.”

As consumers continue to pursue manageable monthly payments, loan terms have lengthened for both new and used automobiles. New auto loan terms grew moderately to 69 months in Q3 2019 vs. 68 months a year earlier.  This has helped slow monthly loan payment growth to 3.6% year-over-year with an average monthly payment for new vehicle loans of $561 in Q3 2019, up from $542 in Q3 2018. Loan terms have also lengthened for used vehicles, growing from 63 months in 2018 to 64 months in 2019. The lengthened loan terms for used vehicles has slowed the rate of growth for monthly loan payments to 3.0% year-over-year, bringing the average used monthly payment to $389. And as loan amounts and terms have increased, average loan-to-value at origination has inched up.  Used LTV grew to 112.2 from 109.4 a year earlier, while new LTV grew to 100.0 from 99.6 a year earlier.

Q4 2019 Auto Loan Trends

 

Auto Lending Metric
Q4 2019Q4 2018Q4 2017Q4 2016
 

Number of Auto Loans
 

83.8 million
 

82.0 million
 

79.4 million
 

75.8 million
 Borrower-Level Delinquency
Rate (60+ DPD)
 

1.50
%
  

1.44%
  

1.43%
  

1.44%
 
 

Average Debt Per Borrower
$19,202 $18,858 $18,597 $18,391 
 

Prior Quarter Originations*
7.5 million7.1 million7.1 million7.5 million
Average Balance
of New Auto Loans*


$
22,232
 

$21,520
 

$20,909
 

$20,743
 

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Performance has remained relatively strong. The delinquency level (60+DPD) increased to 1.50% in Q4 2019, up from 1.44% in Q4 2018 and 1.43% in Q4 2017. Delinquency rates continue to be well-managed even as average auto balances rise.

“External factors may have put pressure on the affordability crunch in the auto industry, but it has not put a damper on consumer appetite for credit,” said Matt Komos, Vice President of Research and Consulting in TransUnion’s Financial Services business unit. “As a result, consumers are taking control of their financial situations and weighing their financing options. We anticipate growth to continue in the used financing sector of the market as consumers pursue pricing that is a bit more palatable and offers a more manageable monthly payment.”

TransUnion’s Q4 2019 Industry Insights Report features insights on consumer credit trends around personal loans, auto loans, credit cards and mortgage loans. For more information, please register for the Q4 2019 Industry Insights Report Webinar.

Resurgence in Mortgage Refi Drives Double-Digit Origination Growth

Q4 2019 IIR Mortgage Loan Summary
Mortgage originations increased 39% year-over-year to over 2.5 million originations in Q3 2019 – mostly driven by refi activity. Generation Z experienced the highest year-over-year origination growth in Q3 2019 at 84%, followed by Millennials (43%) and Gen Xers (41%). Despite this growth, Generation Z makes up the smallest proportion of originations at 2%, with Millennials and Gen Xers accounting for 36% and 34% respectively. Average new account balances grew 16.2% year-over-year from $227,376 in Q4 2018 to $264,319 in Q4 2019. Generation Z still had the lowest average new account balance at $151K, compared to Millennials at $264K and Gen Xers at $264K. While overall mortgage delinquency (60+DPD) has declined year-over-year from 1.71% in Q4 2018 to 1.62% in Q4 2019, mortgage delinquencies have risen for two consecutive quarters. Mortgage delinquency increased for two consecutive quarters twice before since 2009.

Instant Analysis
“The year-over-year increase in mortgage originations for Q3 2019 was primarily driven by the increasing popularity of mortgage refi, which made up around 43% of all mortgage originations, compared to 30% last year at the same time. The growth in refi activity aligns with the larger new account balance sizes observed in Q3 2019 - consumers with higher mortgage amounts generally have more incentive to refinance as they have more to save on monthly payments. Our MSA-level analysis further supports this trend - of the top 20 MSAs, those with traditionally higher home prices, such as San Diego, Los Angeles, and San Francisco, had the largest year-over-year origination growth at 91%, 85% and 70% respectively.”

-       Joe Mellman, senior vice president and mortgage business leader at TransUnion (TRU)


Q4 2019 Mortgage Loan Trends

 

Mortgage Lending Metric
Q4 2019Q4 2018Q4 2017Q4 2016
 

Number of Mortgage Loans
 

53.6 million
 

52.8 million
 

53.2 million
 

52.0 million
 Borrower-Level Delinquency
Rate (60+ DPD)
 

1.55
%
   

1.66%
   

1.86%
   

2.28%
 
 

Average Debt Per Borrower
$212,040 $206,922 $201,736 $194,415 
 

Prior Quarter Originations*
2.5 million 

1.8 million
 

1.9 million
 

2.2 million
Prior Quarter Average Balance
of New Mortgage Loans*


$264,319
 

$227,376
 

$228,563
 

$235,820
 

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Performance Remains Strong as Personal Loan Balances Reach $161 Billion

Q4 2019 IIR Personal Loan Summary
Following a year of slowed growth in the consumer lending industry, the pace of personal loan originations picked up for the first time since 2018. With a year-over-year growth rate of 9.7%, 5.1 million new loans were originated in Q3 2019 bringing the number of consumers carrying a personal loan to over 20 million. During this expansion, performance has remained stable as delinquencies (60+DPD) decreased to 3.47% from 3.63% between Q4 2018 and Q4 2019. In addition, the average debt per borrower has continued a steady year-over-year trajectory with a slight uptick to $8,994 in Q4 2019.

Instant Analysis
“While we are still shy of the double-digit origination growth exhibited throughout much of 2018, the rate of new accounts has picked up pace which demonstrates the increasing affinity for personal loans in the consumer wallet. Total balances climbed to 16.4% year-over-year to $161 billion, which is the result of larger loan amounts secured by the above prime population. Overall the average account balance has remained stable across risk tiers along with performance – demonstrating well-managed risk by lenders across the consumer lending industry.”

-       Liz Pagel, senior vice president and consumer lending business leader at TransUnion (TRU)

Q4 2019 Unsecured Personal Loan Trends

 

Personal Loan Metric
Q4 2019Q4 2018Q4 2017Q4 2016
 

Total Balances
 

$161 billion
 

$138 billion
 

$117 billion
 

$102 billion
 Number of Unsecured
Personal Loans
 

23.2 million
 

21.1 million
 

18.2 million
 

16.9 million
Number of Consumers with
Unsecured Personal Loans
20.8 million19.1 million16.9 million15.8 million
Borrower-Level Delinquency
Rate (60+DPD)
 3.47%  3.63%  3.29%  3.83% 
 

Average Debt Per Borrower


   $
8,994
 

     $8,402
 

      $8,083
 

     $7,640
 
 

Prior Quarter Originations*
5.1 million4.6 million3.8 million3.5 million

Average Balance of New
Unsecured Personal Loans*
$6,276 $6,217 $6,218 $5,443 

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Credit Card Growth Brings Access to Credit to an All-time High

Q4 2019 IIR Credit Card Summary
The credit card industry continues to grow as a record 184 million consumers now have access to a credit card. Total balances continued its growth trajectory for 27 consecutive quarters, growing 5.8% year-over-year from $801 billion to $847 billion in Q4 2019. Despite an expansion of credit, card issuers are prudently managing risk across their portfolios amid a more pronounced rise in delinquencies compared to recent years. The average new account credit line has largely remained stable, decreasing to $5,214 in Q4 2019 from $5,247 over the same period last year. Overall, the credit card market has continued to show healthy signs of growth as Q3 2019 hit a milestone in terms of origination growth with 18.6 million new accounts – the first quarter ever to reach above 18 million.

Instant Analysis

“Rising consumer demand combined with new credit products available in the marketplace resulted in another healthy quarter of growth for the credit card industry. Both origination and balance growth have remained strong as consumers continue to access and use credit. In addition, the recent trend of credit expansion has also been reflected on the private label side of the industry as new account growth continued for the second straight quarter following a period of pullback over the past two years. From a delinquency standpoint, we will continue to monitor the increase seen this past quarter and are particularly interested in Q1 2020 credit card performance. From a seasonality perspective, credit card delinquencies usually rise in Q4 and decline in Q1 and the rate of decline could be quite telling.”

      -       Paul Siegfried, senior vice president and credit card business leader at TransUnion (TRU).

Q4 2019 Credit Card Trends

 

Credit Card Lending Metric
Q4 2019Q4 2018Q4 2017Q4 2016
 

Number of Credit Cards
 

454.7 million
 

429.9 million
 

418.6 million
 

404.4 million
Borrower-Level
Delinquency Rate (90+
DPD)
  

2.18%
   

1.94%
   

1.87%
   

1.79%
 
Average Debt Per Borrower

$
5,834
 
$5,736
 
$5,644
 $5,486 
Prior Quarter Originations*18.6 million16.4 million16.3 million 

17.5 million
Average New Account
Credit Lines*


$ 5,214
 

$ 5,247
 

$ 5,194
 

$ 5,373
 

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

For more information about TransUnion’s Q4 2019 Industry Insights Report, please register for this quarter's webinar.

About TransUnion (TRU)
TransUnion (TRU) is a global information and insights company that makes trust possible in the modern economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good.®

A leading presence in more than 30 countries across five continents, TransUnion (TRU) provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people.

http://www.transunion.com/business

ContactDave Blumberg
 TransUnion (TRU)
E-mail  dblumberg@transunion.com
Telephone 312-972-6646

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Source: TransUnion (TRU)

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