TransUnion's 2019 consumer credit forecast is projecting a rise in subprime auto loan originations, though to a level still well behind those observed prior to the recession in 2007. TU believes a strong economy, buoyed by low unemployment rates and a growth in disposable income, is going to strengthen the consumer credit market at large in 2019.
Subprime Lending Predicted to Increase in 2019
The most recent consumer credit forecast from TransUnion predicts that subprime car loan originations are going to climb in 2019. Here's the percentage of loan originations that went to subprime borrowers:
- 2017: 14.6%
- 2018: 15.1%
- 2019 projection: 16.5%
There's always a lot of commotion surrounding subprime lending, especially after the housing bubble burst and the Great Recession followed. However, TU notes that their 2019 projection remains well below pre-recession levels – in 2007, the percentage of subprime auto loan originations stood at 20 percent.
Part of the reason TransUnion is forecasting an increase in subprime lending is that delinquency rates are projected to hold steady. Here's a look at serious car loan delinquencies over time:
- Q4 2010: 1.27%
- Q4 2016: 1.44%
- Q4 2017: 1.43%
- Q4 2018: 1.43%
- Q4 2019 projection: 1.44%
TU defines serious car loan delinquencies as those with payments that are 60 days or more past due.
TransUnion believes the steady performance in this area is going to give lenders the confidence to look to slightly expand their portfolios in 2019, while consumer demand for auto loans remains high.
Affordability Has the Potential to Slow Originations
One of the top consumer credit trends from TU's forecast for 2019 cautions that affordability may impact the auto industry. Specifically, more expensive vehicles, rising interest rates, and possible tariffs have the potential to slow down their origination projections.
TransUnion breaks down the total number of auto loan originations as:
- 2015: 28.0 million
- 2016: 28.3 million
- 2017: 27.5 million
- 2018: 28.5 million
- 2019 projection: 29.4 million
However, the credit bureau notes that a number of headwinds have the potential to slow down originations because they could further impact vehicle affordability for consumers. There's the fact that many consumers are financing more expensive vehicles like crossovers, SUVs, pickups, and hybrids. At the same time, rising tariffs could increase prices and interest rates are continuing to tick up. Just before Christmas, the Fed raised rates for the fourth time in 2018.
TU still feels confident enough to project growth in spite of these factors, largely because the economy remains strong in other areas such as stagnant or lowering delinquency rates, low unemployment, and a rising GDP.
Give Your Subprime Business a Boost
TransUnion's consumer credit forecast is calling for an increase in both total and subprime auto loan originations in 2019. Your dealership can take advantage of that with Auto Credit Express' industry-pacing leads. We want to help your store sell more cars and boost your bottom line with our new, used, and special finance auto leads. Learn more by calling us today at 888-535-2277 or filling out our contact form online.