Insights into Auto Loan Trends Amidst Rebounding Inventories
In the ever-evolving landscape of auto loans, the Q2 2023 CIIR Auto Loan Summary by TransUnion (NYSE: TRU) delves into critical insights that illuminate the dynamics of auto financing. Against the backdrop of rebounding inventories and changing consumer behaviors, this report offers a comprehensive view of the auto loan industry.
Rebound in Inventories and Stabilizing Loan Amounts
The Q2 2023 report unveils a notable shift in auto financing dynamics, with inventories making a significant impact. Originations during Q1 2023 experienced a YoY decline of 9.4%, totaling 6.1 million. However, these figures simultaneously saw a seasonal uptick from the previous quarter’s 5.9 million originations. Notably, originations across most risk tiers witnessed YoY declines, with the exception of the super prime tier, which displayed a YoY gain of 2.1%. When compared to 2019 levels, originations remained down across all risk tiers by 9%.
New vs. Used: A Return to Pre-Pandemic Norms
A pivotal trend identified in the Q2 2023 report is the recalibration of the new vs. used car financing split. As new car inventories rebound, the split has shifted, with new cars comprising 42% of all cars financed in Q2 2023. This figure indicates an increase from both YoY and QoQ, reflecting a return to pre-pandemic norms. This shift carries implications for consumer preferences and affordability in the auto market.
Stability in Average Amounts and Payments
The report highlights a stabilization trend in average amounts financed for new and used vehicles. Average amounts financed for new vehicles demonstrated stability YoY, while used vehicles experienced a decline of 6.3% YoY. Furthermore, monthly payments for both used and new vehicles saw increases of 2.4% and 9.1% YoY, respectively. However, these increases have largely plateaued over the past two quarters. This trend underscores the influence of market conditions and consumer preferences on auto loan dynamics.
Delinquencies and Vintage Performance
The Q2 2023 report provides insights into auto loan delinquencies and vintage performance. The account delinquency rate (60+ DPD) remained relatively unchanged at 1.71% in Q2 2023, slightly up from 1.69% in the previous quarter. Vintage performance, when compared to 2021 cohorts, showcased similar patterns. Notably, early glimpses into the performance of Q3 2022 and Q4 2022 originations indicate improvement, suggesting evolving consumer behaviors in response to changing economic conditions.
Expert Insights and the Path Ahead
Satyan Merchant, Senior Vice President and Automotive Business Leader at TransUnion, offers his expertise on the trends highlighted in the report. He notes, “Inventories are on the rebound from pandemic-era lows, which will likely put pressure on both new and used car prices and lead to the return of more new vehicle incentives. As used vehicle values continue to drop from peaks, the focus remains on those recent originations from the past couple of years that originated at peak prices and higher loan-to-value ratios.”
Key Auto Loan Trends in Q2 2023
- Total Auto Loan Accounts: 81,202,918
- Account-Level Delinquency Rate (60+ DPD): 1.71%
- Prior Quarter Originations: 6,120,340
In conclusion, the Q2 2023 CIIR Auto Loan Summary navigates the intricate landscape of auto loans, offering insights into inventories, loan amounts, payments, and delinquencies. As consumer behaviors respond to market dynamics, the auto loan industry remains adaptive and resilient. This report empowers lenders and borrowers alike to make informed decisions, fostering stability in the realm of auto financing.