The number of consumers considered to be in “financial hardship,” or 30 days past due on their auto loans, spiked in April, rising to 3.54% of total outstanding auto loans, up from 0.64% in March, according to a new study from TransUnion. The credit reporting agency defines financial hardship as “factors such as a deferred payment, frozen account or frozen past due payment.
By comparison, that figure stood at 0.51% in April 2019. TransUnion reported 83.8 million auto loans outstanding during the first-quarter of 2020, but did not provide an updated figure for Q2.
The unemployment rate has spiked to a record high of 38.6 million of initial jobless claims due to the coronavirus economic crisis, and it is unclear how deeply credit performance will be impacted as “low consumer confidence will exacerbate affordability challenges and impact future growth in the auto finance market,” said Satyan Merchant, TransUnion’s senior vice president and automotive business leader.
“We anticipate the auto market will continue to face challenges in the wake of COVID-19 as dealers will be forced to transition away from brick and mortar operations,” Merchant added. “However, we can expect digital innovation to help transform the space with an increasing number of consumers looking to such channels to initiate and complete the car buying process.”
Originally published on Auto Finance News