Auto sales are rebounding. That means banks will be doling out more loans this year as car buyers regain their appetites and delinquency rates stabilize.
Lenders offered 28 percent more auto loans in the final three months of last year compared with the same period a year earlier, according to TransUnion, a Chicago-based credit reporting agency.
"The banks and credit unions now have the money to lend," said Peter Turek, automotive vice president for TransUnion's financial services group. "We're even hearing about subprime lending going up."
Lenders are keeping pace with consumers who are feeling better about the economy and their jobs, and as a result are spending more, even on cars.
"There's finally demand for new autos," Turek said.
All major automakers posted double-digit gains in U.S. sales last month. General Motors Co., the nation's largest carmaker, led the way with a 49 percent surge in sales. Toyota Motor Corp. followed with a 42 percent increase. Analysts attributed the overall sales gain to attractive lease deals and financing.
More sales mean more loans. And an increase in auto loans generally keeps a lid on delinquencies because the influx of new loans helps bring down the overall rate. Even so, last year the delinquency rate for auto loans stood at historically normal levels.
Lenders are encouraged by the improvement. The delinquency rate for auto loans with payments late by 60 days or more edged up to 0.59 percent in the fourth quarter, from 0.58 percent in the prior three-month period. But that is much lower than a year earlier when the rate stood at 0.81 percent. It peaked at 0.86 percent in late 2008.
Even the bellwether states for the financial crisis of Illinois, Florida, Nevada and Arizona, which saw sharp increases in delinquency rates during the recession, now are showing sustained improvement, Turek said.
"These states were entangled in the mortgage crisis and now they're stabilizing," Turek said.
He said that by the middle of this year, he expects the delinquency rate to fall to 0.48 percent and finish around 0.60 percent. The upswing is expected because typically delinquency rates are highest in the last quarter and lowest in the first quarter.
Auto loan delinquency is much lower than late payments on credit card or mortgages. However, the rates of mortgage delinquency and credit card delinquency both improved quarter-over-quarter and year-over-year.
In the fourth quarter, the size of the average auto loan rose to $12,602 from $12,500 in the third quarter. In 2009, the amount was $12,568.
TransUnion's figures are culled from 27 million randomly chosen individual credit files, about 10 percent of its database.