Auto loans delinquent 60 days or more edge up
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The number of auto loans delinquent 60 days or more ticked up in the fourth quarter compared with the same quarter a year earlier, and it was the first quarterly increase for such loans in three years, according to Experian Automotive.
Experian Automotive said 60-day-plus delinquencies -- which are likely to be written off as bad loans -- accounted for 0.74 percent of all loans in the fourth quarter of 2012, up from 0.72 percent of all loans a year earlier.
That hasn’t happened since the fourth quarter of 2009, Experian said.
Delinquencies remain low. Experian said 30-day delinquencies were lower in the fourth quarter than the year before.
“Overall, our Q4 analysis shows that the auto lending market is extremely healthy,” Melinda Zabritski, director of automotive credit for Experian Automotive in Schaumburg, Ill., said in a statement today.
Changing standards
Delinquencies on auto loans started falling in 2009 as lenders tightened approval standards, especially for subprime customers.
Consumer behavior has also contributed to the drop in delinquencies. During the most recent recession many borrowers put a higher priority on making car payments so they could get to work, analysts said; in previous recessions, mortgage payments were the No. 1 priority.
As the U.S. economy has recovered, auto lenders have relaxed credit standards again.
New, independent subprime lenders have also begun originating auto loans.
According to Experian Automotive, subprime auto loans gained share in the third quarter of 2010 for the first time since 2007.
Gravity takes hold
Analysts say it was inevitable that delinquencies eventually would increase as subprime borrowers account for a growing share of loans.
Zabritski and other analysts said they were somewhat surprised delinquencies stayed as low as they did as long as they did. Contributing factors included restraint among auto lenders in relaxing approvals and high used-car values, which sometimes allowed borrowers to sell their vehicles and come out ahead.
The steady rebound in the U.S. economy and overall rise in auto sales have kept delinquencies in check.
In a downturn, delinquencies as a percent of the total are magnified because there’s a higher number of delinquencies divided by a lower number of loans. In an upturn, the opposite is true.
Zabritski said: “Of course, you never want to see an increase in delinquencies, but when you take a step back and look at the market compared to where it was three years ago, we still have remarkable stability.”
You can reach Jim Henry at autonews@crain.com.
