The TransUnion credit bureau expects a healthy auto finance industry in 2022, with low delinquency rates similar to 2021, and with good access to credit, but without much increase in volume.
That’s because it may take all of 2022 and then some, for new-vehicle inventory to recover from the computer chip shortage and other supply chain woes, says Satyan Merchant, senior vice president and auto business leader at Chicago-based TransUnion.
“The asset is the challenge — that is, the inventory. Because of that, we expect originations in 2022 to be flat to slightly higher in total, but it’s relatively flat growth,” Merchant says in a phone interview.
In an annual forecast for the coming year, TransUnion says it expects auto origination unit volume of 28.9 million loans and leases in 2022, vs. an estimated 28.3 million in 2021, an increase of about 2%. That includes new and used vehicles.
“What is under that, is the impact of the inventory challenge. Manufacturers have a really challenging time producing new vehicles,” says Merchant (pictured below, left).
New-vehicle production could attain a more normal run rate before the end of 2022, but there’s so much pent-up demand, production still won’t be able to keep up with demand, he says.
Low volume and high demand suggest per-vehicle prices will remain high, although that’s not part of the TransUnion forecast.
The good news for auto finance is, TransUnion expects the rate of auto delinquencies to remain almost exactly flat, comparing an estimated rate of serious auto delinquencies of 1.51% in the fourth quarter of 2021, vs. a nearly identical forecast for the fourth quarter of 2022, which also rounds to 1.51%.
TransUnion defines serious delinquency as 60 days or more past due.
“In auto, the story is with the inventory challenge,” Merchant says. “It is the biggest factor we expect to be the driver of what originations will look like.”
