The Auto Loan Market Continues to Recover

The Auto Loan Market Continues to Recover

Q1 2021 IIR Auto Loan Market

In Q1 2021, the larger car finance industry largely recovered, with average debt per borrower surpassing $20,000 for the first time since TransUnion started tracking the indicator. In Q4 2020, originations increased again, but at a slower pace than in Q3. The slowdown is mostly attributable to a decrease in the number of loans made to subprime borrowers. Early counts in Q1 2021, however, indicate that this portion of the population is recovering. Serious delinquency rates for auto loans rose to 1.51% in Q1 2021, up from 1.37 percent the previous quarter. Lower subprime originations are contributing to the small increase in overall delinquency rates. Auto portfolios in all risk groups are healthy, according to vintage study.
Analysis

After experiencing the depths of the epidemic last year, the auto loan market is continuing to recover. Originations, balances, and loan performance all indicate to a market where lenders have continued to extend credit to borrowers, while government stimulus, decreasing unemployment, and tax refund season have all contributed to boost family balance sheets. Subprime originations are expected to rebound in Q1 2021 and beyond, based on all of these reasons. Despite the fact that overall delinquency rates are increasing, they appear to be at a tolerable level. There was concern at the start of the pandemic that we would see a significant increase in auto delinquency rates, especially since most consumers were confined to their homes. That anxiety was unfounded, and we expect more car loan growth and strong performance in the foreseeable future.

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