Automotive sales will pick up in 2021, credit bureau TransUnion predicts, though primarily for customers with prime and above credit. As the U.S. economy continues to muscle through the deadly coronavirus pandemic, nonprime customers will steadily vanish from the market.
This slowdown in nonprime originations isn't likely to stem from auto lenders tightening their underwriting practices, said Satyan Merchant, senior vice president and automotive business leader at TransUnion. Rather, a slowdown in demand from consumers in these credit tiers will curtail purchases in the new year.
Subprime automotive balances reached historic lows in the spring as the economy buckled under shelter-in-place orders and unemployment rates not seen since the 1930s. Strong consumer demand and aggressive automaker incentives drove sales and profits in the second half of the year, though consumers in the lower credit tiers were largely left out of the recovery.