Subprime Loan Volume Reaches Record Low, Experian Finds

Subprime loan volume declined 55 basis points in the first quarter compared to the year prior while prime loans increased, Experian’s latest State of the Automotive Finance Market report shows.

The subprime loans in 1Q17 comprise 19.8% of the total loan risk distribution compared with 20.4% in 1Q16. As usual, the majority of loan balances remain prime, which covers 41.7% of the loan balance risk distribution. Nonprime loan balances remained steady at around 18% to 19% of the whole loan balance risk distribution.

Total industry loan balances reached a record high of $1.08 trillion dollars in the first quarter, compared with $1 trillion during the same period the year prior and $905 billion in 1Q15.

Banks still comprise the largest part of total open automotive loan balances, with $363 billion in 1Q17, up from $343 billion in 2016. It’s worth noting that credit unions have seen the highest growth in the past year, jumping to $286 billion in the first quarter compared with $249 billion last year.

In the meantime, captives’ total open automotive loan balance has been growing steadily from 2015 to 2017, reaching $252 billion in the first quarter.

Loan and lease originations have become increasingly “prime” across all new, and used financing, the report shows. New vehicles are more likely to be purchased with financing than used vehicles, with new vehicles comprising 44.7% and used vehicles comprising 55.2% of financing dollars.

Additionally, 30-day delinquency rates are dropping while 60-day delinquency rates are rising, the report shows. Delinquencies 30-days past due dropped to 1.96% of loans compared with 2.1% the year prior. Meanwhile, delinquencies 60-days past due rose slightly to 0.67% of loans and leases compared with 0.61% last year.

Experian did not comment by press time.

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