Industry-watchers insist that today’s auto loan delinquency rates are low by historical standards. But a slight uptick in 30- and 60-day delinquencies in the second quarter could be a sign that the long decline in delinquencies could be reversing.
The second-quarter increases, reported by Experian Automotive last week, were tiny -- not even one-tenth of 1 percentage point. But it was only the second time since the third quarter of 2009 that both 30- and 60-day delinquencies increased from the year-earlier quarter, a review of several quarters of Experian data show. The first time was in the first quarter of 2013.
Beyond 2009, there have been quarters in which 30-day delinquencies were down and 60-day delinquencies were flat vs. the year-earlier period -- namely, the third and fourth quarters of 2013. And there was one quarter -- the fourth quarter of 2012 -- in which 60-day delinquencies rose slightly while 30-day delinquencies dropped.
Even so, delinquencies have defied expectations. Analysts had predicted delinquencies to start rising in early 2012, as auto sales increased and loans to customers with subprime credit rebounded. They now cite a gradual improvement in jobs, lower household debt, low interest rates and higher-than-expected used-car prices as factors that kept delinquencies low.
To be sure, those factors are still in force and delinquency rates are still low, certainly lower than they were in 2009. In the third quarter of that year, 30-day delinquencies represented 3.32 percent of total auto loans, and 60-day delinquencies accounted for 0.95 percent, Experian data show.
In the second quarter of 2014, according to Experian, the 30-day delinquency rate was 2.39 percent of total auto loans, a barely measurable increase from 2.38 percent in the 2013 period. The 60-day delinquency rate in the second quarter this year was 0.62 percent, also only a tiny increase from 0.58 percent in the 2013 quarter.
Melinda Zabritski, senior director of automotive finance for Experian Automotive, said in a written statement last week that the company will keep an eye on delinquencies in the coming months, “as it may dictate the availability of credit in the future.”
In the long run, lenders could tighten approval standards in reaction to higher delinquencies and loan losses, but that probably won’t happen any time soon.
“We’re starting to see a slight uptick in the number of consumers struggling to make their automotive payments on time,” Zabritski said in the statement. “However, we have to keep in mind that these percentages are still extremely low.”
You can reach Jim Henry at firstname.lastname@example.org