Auto Loan Delinquencies Rise; $25 Billion in Loans Past Due, Says Experian Automotive
As the economy struggles, automotive loan delinquencies are increasing, putting nearly $25 billion in loans past due, according to figures released by Experian Automotive at the Automotive Finance Summit convening in Las Vegas.
LAS VEGAS — As the economy struggles, automotive loan delinquencies are increasing, putting nearly $25 billion in loans past due, according to figures released by Experian Automotive at the Automotive Finance Summit convening in Las Vegas.
Experian Automotive presented a comprehensive overview of automotive lending trends based on a quarterly analysis of the market from the second quarter of 2006 through the second quarter of 2008. The analysis found that loans 30 days past due were up 9 percent year-over-year in the second quarter of 2008, while loans 60 days past due were up 11 percent. Currently, 2.48 percent of all automotive loans are 30 days past due, compared with 2.28 percent in the second quarter of 2007. Automotive loans 60 days past due rose to 0.75 percent from 0.67 percent.
"The economy continues to force lenders to tighten their loan criteria while consumers are faced with increased difficulty in repaying those loans on time," said Scott Waldron, president of Experian Automotive. "Our data has shown a clear pattern of rising past-due loans in the auto industry, where even a slight increase in delinquent loans severely affects the industry by accounting for hundreds of millions of dollars in unpaid debt."
Consumer credit also has worsened in the past two years, with the percentage of prime automotive loans (680 credit score and above) falling by 8 percent. In the second quarter of 2008, 56.5 percent of all open automotive loans were to people with prime credit, down from 61.1 percent in the second quarter of 2006.
"It is important for financial organizations to track these trends to evaluate how current economic forces are specifically impacting their loan portfolios," said Melinda Zabritski, director of automotive credit for Experian Automotive. "Using outside information and analysis can help lenders understand unique credit patterns in local markets and how these subtle nuances can impact financing in one city versus another."
In other findings:
· Market share for captive finance companies (those owned by auto manufacturers) has fallen from 31.1 percent of all loans opened in the second quarter of 2006 to 25.2 percent of all loans opened in the second quarter of 2008.
· As auto sales have fallen, total loan originations have dropped by 14 percent.
· Banks have become more cautious in their overall lending, dropping their percentage of below subprime loans from 15.7 percent in the second quarter of 2006 to 9.7 percent in the second quarter of 2008.
· Finance companies specializing in automotive loans have picked up the below subprime market share from banks, growing their below subprime portfolios from 15 percent in the second quarter of 2006 to 24.6 percent in the second quarter of 2008.
· Below subprime is the fastest-growing automotive loan segment, increasing from 9.4 percent in the second quarter of 2006 to 13.4 percent in the second quarter of 2008.
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