ABA: Auto loan delinquencies flat in 4th qtr.

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Auto-loan delinquencies were essentially flat at a low level in the fourth quarter of 2013, edging down very slightly from the same period a year earlier, according to data released today in the American Bankers Association Consumer Delinquency Bulletin.

Low delinquencies encourage lenders to keep credit widely available.

Keith Leggett, the group’s senior economist, told Automotive News in a phone interview today that delinquencies are flat but are liable to increase as subprime penetration increases and as loans mature.

“While we have seen an increase in subprime lending taking place, one of the key points is subprime loans haven’t had a chance to season yet,” he said. “We don’t really know how they will perform in the long run. Primarily what you’re getting is what we would call a denominator effect.”

Delinquencies are expressed as a percentage of delinquent loans out of total loans outstanding. The “denominator effect” means that in a sales upturn, the total number of loans outstanding (the denominator) is growing faster than the number of new loans that go bad (the numerator). That tends to minimize delinquencies as a percentage of the total.

Delinquencies for indirect auto loans were 1.62 percent of the total outstanding in the fourth quarter, down from 1.64 percent a year earlier, the ABA said. The association defines delinquencies as loans that are 30 or more days past due.

Indirect auto loans are the kind negotiated at dealerships, as opposed to direct-to-consumer loans made by banks and credit unions.

Direct auto-loan delinquencies fell to 0.79 percent in the fourth quarter, from 0.88 percent a year earlier.

You can reach Jim Henry at autonews@crain.com.

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