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Maturities Stretching, Delinquencies Increasing, Says NAF Association

Loan maturities stretched out in 2006, but so did delinquency rates, according to the National Automotive Finance (NAF) Association's annual survey.

by Staff
August 21, 2007
2 min to read


Loan maturities stretched out in 2006, but so did delinquency rates, according to the National Automotive Finance (NAF) Association’s annual survey.



Conducted by Benchmark Consulting International — which surveyed a record 28 finance companies — the study revealed that 76 percent of new-car contracts were written at longer than 60 months. Sixty-five percent of contracts booked by banks and holding company subsidiaries were more than 60 months. That percentage dropped to 27 percent for contracts booked by independent financing companies.

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The study also showed that year-over-year delinquency rates were significantly higher across the board in 2006, which NAF officials attributed to the 14 new respondents to this year’s survey.



However, looking at the data, account delinquency rates for small and medium respondents jumped from 6.2 percent in 2005 to 14.6 percent last year. Larger respondents saw account delinquency rates go from 6.8 percent in 2005 to 8 percent last year.



Weighted average origination ratios were down across the board, the study also showed, indicating the increased competition in the non-prime segment. However, the study found that data from 2005 and 2006 revealed a cumulative increase in originations of 13 percent in dollars and 12 percent in accounts. Despite the growth, nearly 75 percent of non-prime originations cluster in a credit score of 500 to 679.



Looking at originations, one-third of booked deals fell in the nonprime 550-619 FICO range, while 125 percent fell in the prime and super-prime range of 620 and above. Fifty-two percent fell in the high-risk and super high-risk categories of below 550.



Independent financing companies, which the study called small or medium respondents, also bought deeper than banks and holding company subsidiaries, with the average credit score for the independents being 485, an increase from 479 reported in 2005. The average credit score for banks and holding company subsidiaries, or what the study deemed larger respondents, was 591, an increase from the 589 average reported last year.

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Origination dollars and accounts financed also showed year-over-year increases, as did portfolio dollars and accounts, which increased only slightly. Bankruptcy dollars and charge-offs based on bankruptcy decreased, which could be attributed to the changes in bankruptcy laws instituted at the end of 2005. Average monthly repossessions and dollar loss per repossessed unit increased 8 percent compared to 2005.



Despite participation being at a record high, the response rate for the survey has decreased over the last few years. Divided into categories based on size, independent finance companies made up 64 percent of the respondents this year. Banks or holding company subsidiaries made up the second largest group with 25 percent. Seven percent of respondents were manufacturers captive finance companies and 4 percent were dealer captive finance companies.

Topics:F&I

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