CHICAGO–An executive with TransUnion is urging CFOs at auto dealerships to either start or grow their partnerships with credit unions as vehicle prices continue rising.
In an interview with WardAuto.com, Satyan Merchant, senior vice president and automotive business leader, said, “Supply-chain challenges continue to impact the auto finance market, with affordability eroding for many consumers. There’s a clear trend in rising monthly payments for both new and used vehicles, which have also been driven higher by the Federal Reserve’s recent rate hikes.
“Increased costs to consumers may be seen as an opportunity for some lenders with credit unions gaining market share, possibly because they are often able to offer lower interest rates to auto loan borrowers.”
Uptick in Delinquencies
According to WardsAuto.com, CFOs will want to note that serious auto loan delinquencies, which TransUnion defines as 60-plus days past due, increased 40 basis points between Q2 2021 and Q2 2022, but performance differs for recent vintage loans.
“One example shared by TransUnion is that loans originated in Q2 and Q3 2020 continue to outperform pre-pandemic vintages,” WardsAuto.com reported. “Loans from Q2 and Q3 2021 are beginning to perform on par with them. Originations in Q1 2021 declined 8.3% from the previous year, though they remained above Q1 2019 levels.
TransUnion reported that used vehicles “propel the debt metric,” with average used-vehicle monthly payments rising 22% on a year-over-year basis to $505 in Q1 2022.
The ‘Good News’
“The good news continues to be (that) there is demand” for automobiles, Merchent told WardsAuto.com. “And we don't think there's much weakening in the demand. While this hasn't necessarily proven out directly in the numbers, I think that the auto industry generally is impacted by employment. Although there are recession fears out there, unemployment is extremely low. So, I think as long as employment stays strong there will be the demand for vehicles.”