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TransUnion predicts auto loan originations, lease activity to pick up next year.

TransUnion Sees Auto Loan, Lease Volume Rebounding

TransUnion expects auto originations of about 6.9 million accounts in the first quarter of 2021, up about 8% from a year ago. The second-quarter forecast is 7.4 million accounts, an increase of 14.6% from the low point of 2020.

Credit bureau TransUnion expects auto loan and lease volume to recover in first-half 2021, and a roughly flat environment for auto finance delinquencies in the coming year.

“We’re projecting a bit of a rebound” in volume, Matt Komos, TransUnion vice president-research and consulting, says in a recent webinar.

Specifically, TransUnion expects auto originations of about 6.9 million accounts in the first quarter of 2021, up about 8% from a year ago. The second-quarter 2021 TransUnion forecast is 7.4 million accounts, an increase of 14.6% from the low point of 2020. Totals include loans and leases, new and used.

However, TransUnion isn’t making its usual precise forecast for auto delinquencies for this time of year, because of the economic uncertainty from the ongoing effects of the coronavirus.

“We’ve seen improvement from the dark days of April, but we’re still seeing high unemployment,” Dan Simmons, director of research and consulting, says in the webinar.

“We may be looking at more stimulus coming up, but that remains to be seen.”

It’s also unclear how fast the new coronavirus vaccine reaches 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’s temporarily in “forbearance” status until April and May because of the pandemic.

“How are those consumers going to perform when the forbearance for their mortgage ends?” he asks. “We are definitely going to have some pressure on delinquencies.”

Having said that, Komos says he expects auto lenders in 2021 to stick with a trend that began before the pandemic: cutting back on loans to customers at the riskiest end of subprime credit. “We expect things (delinquencies) to be relatively flat, after a slight uptick at the end of this year,” he says.

A year ago, TransUnion predicted auto delinquencies of 60-plus days past due in the fourth quarter of 2020 would represent about 1.44% of outstanding accounts, compared with 1.47% in like-2019.

That may turn out to be about right, even though nobody predicted the pandemic. For the third quarter of 2020, TransUnion says the 60-day auto loan delinquency rate was 1.45%.

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