Even as subprime lending has picked up, resulting in more vehicle sales to credit-challenged customers, delinquencies and repossessions have fallen to record lows, data from Experian Automotive show.
Melinda Zabritski, senior director of automotive credit for Experian Automotive, says a number of reasons could explain the apparent discrepancy. But the most simple is fairly basic: "Rates are down," she said.
Low interest rates keep loans more affordable, thereby helping consumers avoid delinquencies and defaults. And as long as delinquencies and repossessions remain low, lenders will be encouraged to and can afford to offer easier access to credit, a big positive for dealerships.
Repossessions in the second quarter reached the lowest rate for any quarter since Experian started keeping track in 2006, the credit bureau said. Only 0.36 percent of all vehicle loans ended in a repossession for the quarter, down from 0.43 percent a year earlier and below the previous low of 0.41 percent in the second quarter of 2006.
Sixty-day delinquencies -- those most likely to be written off as a bad loan -- were flat vs. a year ago at 0.58 percent. That's the second-lowest rate Experian has on record. The lowest was 0.53 percent in the second quarter of 2006.
Thirty-day delinquencies were the lowest for any second quarter on record, at 2.38 percent of outstanding loans, Experian said. Other recent quarters have been slightly lower. In the first quarter of 2013, the 30-day delinquency rate was 2.36 percent. Zabritski said delinquencies typically increase from the first quarter to the second quarter, but the increase this year was less than average.
Low loan losses have helped sustain an increase in subprime lending, analysts said. Experian said subprime loans accounted for 35.2 percent of outstanding auto loans in the second quarter, up from 34.9 percent a year earlier.