The pandemic saw many lenders retreat from the subprime tier, which made up just 12.3 percent of account volume in the first quarter of 2021 and 12.9 percent in the first quarter of 2022, before recovering to 14.2 percent for the first three months of this year. Subprime volumes hovered around 15 percent before the pandemic.
According to TransUnion/S&P Global Mobility AutoCreditInsights, the high delinquency rate has encouraged captive finance companies, banks, credit unions and independent lenders to tighten underwriting standards. Combined with high interest rates and lower used-car inventories, this has led to a decrease in loan originations. There were 15.3 percent fewer originations in the fourth quarter of 2022 than in the same quarter of 2019, according to S&P Global Mobility.
But it’s not all bad news when it comes to auto loans.
Vintage performance, which measures how an account performs over a certain period after the loan is originated, shows relative strength in the new-vehicle segment. Recent vintages are at pre-pandemic lows, performing better than pre-pandemic portfolios at the same age, according to S&P Global Mobility.
“We continue to pay close attention to delinquencies, while seeing positive signs among vintage data,” said Satyan Merchant, senior vice president and automotive business leader at TransUnion.
On the used-vehicle side, the first half of 2022 saw vintage delinquency rates for five to 10 months from origination elevated above prior years. In the second half of the year, rates fell back toward pre-pandemic levels, according to S&P Global Mobility.
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