The U.S. may be in or headed toward a recession, but analysts see auto loan originations growing, delinquencies stabilizing.

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Analysts at TransUnion find most shoppers (52%) surveyed are optimistic about the economic future, even though 82% believe the U.S. is currently in or will move into a recession before the end of 2023.

These findings are included in TransUnion’s Consumer Pulse study of respondents’ attitudes about their financial future during the next 12 months. Millennials (64%) and Gen Z (61%) respondents are the most optimistic, despite rising interest rates and auto prices.

 “When looking at our economic environment, we’ve had quite a good run here in the United States for over a decade,” Satyan Merchant, senior vice president and auto business leader at TransUnion, tells Wards. “I don’t think the optimism is just attributed to youth. Over time, people have become more educated about their finances and credit.”

Those factors Merchant mentions are among those that have kept auto loan numbers, including originations and delinquencies, from returning to pre-pandemic levels.

Lenders and F&I managers should expect to see auto delinquencies increase through the end of 2022 but finish about .05% lower by the end of 2023, reports Merchant. He says the delinquency increase is due to rising car prices, employment layoffs, increasing interest rates and other economic challenges. The percentage of borrowers more than 60 days past due is expected to climb to 1.95% in Q4 2022 but will drop slightly, finishing 2023 at 1.90%. That shows delinquencies are not rising, which is a positive sign, he says.

Merchant also points to an uptick in auto loan originations as a prime example of the survey respondents’ bright outlook. TransUnion reports those figures in millions as follows: 27.9 in 2019, 26.5 in 2020, and 29.3 in 2021. Projected figures are 27.5 for 2022 and 28.8 for 2023.

Inventory increases are among the reasons originations should rebound in 2023, though not as much as manufacturers hope. Current high-interest rates and signals from the Federal Reserve that more increases may come are among the reasons originations are not higher, he says.

Still, consumers believe they are better off financially than they were during the pandemic. Stimulus money and the reopening of some businesses are among the factors likely boosting respondents’ optimism and will move toward auto finance stabilization, Merchant says.

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