TransUnion: Canadian Auto Loan Delinquency Rate Drives Higher to Close 2015

TransUnion’s (TRU: NYSE) latest MarketTrends report found that Canadian auto loan delinquency rates rose nearly 10% in the last year to 1.32% in Q4 2015, the highest level observed in four years. The Q4 2015 rise in serious auto loan delinquency (60 or more days past due, including write-offs) was primarily driven by increases in Alberta and Saskatchewan, areas that have been most impacted by the oil slump.

“This was the largest spike in the national auto loan delinquency rate that we’ve observed in quite some time, but we do think it’s a regional issue,” said Jason Wang, TransUnion’s director of research and analysis in Canada. “Falling oil prices have led to rising unemployment rates in oil-rich regions. We are now seeing the increase in unemployment in these areas manifest as rising delinquencies across the board, though the greatest impact has been on auto loans.”

As of Q4 2015, Saskatchewan had the highest auto loan delinquency rate of all provinces at 2.7%, a 19% jump from Q4 2014. Alberta had the second highest auto loan delinquency rate in the nation at 2.4%, but this represented an even greater year-over-year increase of 35%. A 2015 TransUnion oil impact study analyzed consumer payment patterns and predicted double-digit increases in delinquencies for oil-rich regions through at least 2016. “We’re pleased our forecasting models were so effective, although it’s unfortunate our news is not positive,” said Wang.

60+ DPD Delinquency Rates for Auto Loans and Leases

Overall Delinquency Rates Also Experienced Regional Differences

When all non-mortgage loan products are considered together, delinquency rates (the ratio of all accounts 90 or more days past due) remained nearly the same at the end of 2015 as in Q4 2014, with delinquencies rising one-basis point from 2.66% in Q4 2014 to 2.67% in Q4 2015. Among the four major provinces, the largest yearly increases occurred in Alberta (up 5.67%) and Quebec (up 4.96%). On a positive note, heavily populated provinces Ontario (down 3.03%) and British Columbia (down 3.99%) led declines in overall delinquency rates.

“While Alberta is clearly suffering from the oil slump, other parts of the country are apparently not impacted, and may have even benefited,” said Wang. “Ontario, for example, is a net energy consumer due to the heavy presence of manufacturing. Lower oil prices mean lower energy costs, which is a boon to that sector. Furthermore, a weaker Canadian dollar is also helping Ontario manufacturers export their products.”

90+ Day Delinquency Rates for Non-Mortgage Loans

Balance Levels Remain Stable, Though Credit Card Debt Is Rising

The report also found that average debt levels for Canadians were relatively unchanged in 2015, with a small uptick from $21,428 in Q4 2014 to $21,512 in Q4 2015. Much of the debt rise occurred in the credit card space, where a 4.1% increase was observed between Q4 2014 ($3,659) and Q4 2015 ($3,810). Credit card debt levels are now at a three-year high.

“It’s not unusual to see a Q4 spike in credit card balances because of holiday shopping. What caught our attention was that, compared to 2014, consumers used their credit cards much more during the 2015 holiday season,” said Wang. “Our forecast model predicts that average credit card balances will remain around $3,800 for the rest of 2016, and we don’t expect consumers to significantly reduce their card debt in the near future. As always, we encourage consumers to spend within their means.”

Average Consumer Non-Mortgage Debt Levels

More information about the Q4 2015 TransUnion MarketTrends report can be found here.

About TransUnion MarketTrends

TransUnion MarketTrends is an in-depth, full population-based solution that provides statistical information every quarter from TransUnion’s national consumer credit database, aggregated across virtually every active credit file on record. Each file contains hundreds of credit variables that illustrate consumer credit usage and performance. By leveraging Market Trends, institutions across a variety of industries can analyze market dynamics over an entire business cycle, helping to understand consumer behaviour over time and across different geographic locations throughout Canada. Businesses can access more details about and subscribe to MarketTrends at http://www.transunioninsights.ca/MarketTrends.