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TransUnion: Auto loan debt rose in late ’07

Jeremy Simon

Cars are putting a crimp in U.S. wallets, according to an analysis by credit bureau TransUnion, which says that auto loan debt rose nationwide in the final months of last year.

TransUnion took a look at how much car buying cost U.S. drivers in the fourth quarter of 2007. When the auto industry was considered by state, certain regions of the country fared worse than others: Nevada drivers had the largest average auto loan debt, Oregonian motor vehicle operators saw the steepest rise in auto debt and Louisiana motorists were the most delinquent on their auto payments.

More people, more cars
“It is not surprising that the greatest levels of average auto loan debt are found in areas with some of the biggest population growth rates in the country,” says Ezra Becker, a principal consultant in TransUnion’s financial services group. Another factor was “decentralized metropolitan areas” that make car ownership a greater necessity.

“It is in these markets that demand is higher and thus prices are greater,” Becker says. “It also may be that auto loans in these regions are relatively younger and hence have higher balances,” while in states with lower demand and “more seasoned” loans, “balances are generally lower as the average auto loan gets closer to its payoff date,” says Becker.

Stand-out states
Nationally, the average auto debt per auto loan borrower rose 0.13 percent to $12,738 in the fourth quarter. Nevada, which the U.S. Census Bureau says was the fastest-growing state between 2000 and 2007, had average auto loan debt of $16,133 — well above the U.S. mean.

In Oregon, average auto debt climbed 3.55 percent, which TransUnion says could correspond to the greatest demand. The Web site Oregon.gov says residents drive nearly 39 billion miles each year, with more than 70 percent of the miles coming from single occupant vehicles.

Auto loan delinquency — defined as the percentage of auto loan borrowers 60 or more days past due — totaled 0.79 nationally in the fourth quarter. Louisiana suffered a 1.44 percent delinquency rate as that state continues to recover from the ravages of Hurricane Katrina. “Auto loan delinquency seems to mirror the continued economic downturn that has plagued southeastern states like Louisiana and Mississippi in the long wake of Hurricane Katrina, and has been indirectly exacerbated by the continuing mortgage crisis,” TransUnion’s Becker says.

Cars will continue to cost consumers
Delinquencies are expected to climb. TransUnion sees the national 60-day auto borrower delinquency rate advancing to 1.05 percent by the end of 2008 as the economy worsens amid fallout from mortgage crisis.

Since nonpayment of a debt can result in lowered credit scores, letting an auto loan go delinquent could make it harder and more expensive for consumers to borrow money in general. It is particularly painful for credit card holders whose lenders rely on universal default policies to determine interest rates.

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