August 5, 2021

Though improved, pandemic conditions prevail in auto finance

The auto finance industry seems to be holding steady amid the worsening coronavirus pandemic after a strong third quarter boosted many auto lender portfolios. Still, credit bureau TransUnion warns that millions of auto accounts remain in some form of financial hardship status, and ongoing economic pressures will further strain peoples’ wallets.

Consumers are continuing to take advantage of lender accommodations, a sign that the ongoing crisis may be impacting different groups in waves, said Matt Komos, vice president of research and consulting at TransUnion.

Early on in the pandemic, consumers who opted for accommodation programs as a precaution may not have renewed their status once that period of assistance ended. Those consumers were replaced by other groups, who because of government support in the form of stimulus checks and unemployment provisions may not have required lender help until later as different areas of the country underwent lockdowns and mass layoffs.

“There’s been a steady amount of consumers still entering the program,” Komos told Automotive News.

At the end of September, 3.8 million auto customer accounts were in some form of accommodation status. That represents 3.78 percent of auto accounts, significantly higher than 0.54 percent in accommodation in September 2019. Still, it shows improvement from August’s figure, which saw 4.32 percent of auto accounts in hardship status, and June’s high of 7.20 percent.

In a separate October survey, TransUnion found 54 percent of Americans said they were financially impacted by the pandemic. About half of those respondents said they planned to scale back on retail spending in the next three months.

While the majority of consumers report struggling with expenses during the pandemic, they continue to prioritize car payments, Komos said. Auto delinquencies rose slightly to 1.45 percent of open auto accounts, up from 1.4 percent in the third quarter of 2019.

But as coronavirus cases climb nationwide, some local governments have begun to reinstate lockdown procedures. As a result, TransUnion expects another spike in requests for assistance.

“Across the country, many places are going back a stage in their reopening. Reduction in availability in restaurants and bars, limited hours or curfews,” Komos said. “The hourly worker will potentially see an impact over the coming months again.”