Renaissance Realty Group’s Blog: Auto delinquencies up in 3rd quarter - sign of things to come again?

Auto delinquencies up in 3rd quarter

According to credit reporting agency TransUnion, auto delinquency rate -- the rate at which payments fell behind 60 days or more -- edged up in the July-to-September quarter to 0.81%, from 0.80 in the same period last year.  Car loan payments that are 60 days or more late are considered a precursor to default because of the difficulty consumers face in getting caught up.  TransUnion culls its data from approximately 27 million individual credit files in its database.  The small increase in auto delinquencies compared with 2008 also reflects the fact that loans are harder to get, because banks and finance companies have raised their lending standards, and consumers are looking for fewer loans as they tighten their belts.  Those factors led to a drop in average auto debt in the third quarter. Nationally, the amount outstanding on the average car loan dipped 2.5% to $12,542, from $12,861 last year.  Loans taken out as part of this summer's Cash for Clunkers program had not start  ed to appear on most credit reports when the quarter ended. As those new loans show up on credit files, there is a good possibility average auto debt will increase. But since lenders offered loans only to stronger applicants, those loans are less likely to end up delinquent, according to Peter Turek, automotive vice president in TransUnion's financial services group.  TransUnion forecasts the fourth-quarter auto delinquency rate will rise to almost 0.9%. Fourth-quarter rates are typically higher, as consumers divert money to holiday spending. The weak labor market will also continue to weigh on consumers