Amid higher auto lending, 90-day delinquencies hold flat

Auto loan originations grew faster in the first quarter than vehicle sales. Photo credit: DAVID PHILLIPS

U.S. auto loan originations and consumers’ overall debt balances increased in the first quarter from a year earlier, but the delinquency rate for loans past due three months or more remained flat, according to a New York Fed report.

Auto loan originations for new and used vehicles rose 12 percent from a year earlier to $95 billion, while loans 90 days or more past due remained flat at 3.3 percent, the Federal Reserve Bank of New York said last week in its quarterly Household Debt and Credit Report.

“Lenders are using good judgment on who they give loans to, and that’s why they are able to hold overall default rates flat,” said Karl Brauer, senior analyst for Kelley Blue Book.

Auto-loan debt balances jumped 11 percent from a year earlier to $968 billion. Total household debt balances rose 1.7 percent from a year earlier to $11.85 trillion, driven by non-housing debt’s 7.1 percent growth.

90 days delinquent

In the first quarter, 3.3 percent of the national auto loan balance was 90 or more days delinquent, a percentage unchanged from a year earlier but less than the 3.5 percent reported in the fourth quarter of 2014.

“There’s still a lot of demand for cars, and people tend to be more dedicated to making their car payments than their house payments” because consumers need mobility and monthly car payments are lower than housing payments, Brauer said.

“Cars tend to be more resilient,” he said. “It’s a stable environment for car loans.”

For car dealers, the numbers imply that lenders can remain comfortable with keeping the auto loan spigot open.

Total U.S. sales of new light vehicle rose 5.7 percent in the quarter. Light trucks led the way with an 11 percent increase, while car sales eased 0.1 percent.

Off from Q3 peak

But auto loan originations declined 6.9 percent from fourth-quarter levels, the second straight quarter-on-quarter decline. Originations hit a nine-year high of $105 billion in the third quarter, then slipped to $102 billion in the fourth quarter and $95 billion in the first quarter of this year.

The first quarter auto-loan debt balance of $968 billion inched up 1.4 percent from the previous quarter, while the U.S. total household debt balance remained relatively flat. Total household debt is 6.5 percent below its record high of $12.68 trillion set in the third quarter of 2008.

Non-housing debt balances rose 7.1 percent to $3.17 trillion from a year earlier. Compared with the fourth quarter, non-housing debt balances inched up 0.7 percent. A $32 billion rise in student loan debt and a $13 billion spike in auto loan debt drove the non-housing debt increase from the fourth quarter, but it was partially offset by a $16 billion dip in credit card balances, the report said.

The Household Debt and Credit Report is based on data from the New York Fed’s Consumer Credit Panel, which is drawn from a national sample provided by Equifax credit data.

You can reach Hannah Lutz at hlutz@crain.com

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