Record high originations and low delinquency rates indicate the absence of a bubble in subprime auto lending, said Dennis Carlson, deputy chief economist at Equifax.
Over 980,000 auto loans have been originated year-to-date to consumers with an Equifax Risk Score below 620 — an 8.1% increase over 2014 — with total balance of $17 billion, according to the latest Equifax Inc. National Consumer Trends Report. Simultaneously, the rate of outstanding loans of 60 days or more past due decreased to 0.81% in April, which is the lowest delinquency rate since Sept. 2005.
“This is a further confirmation that things are performing quite well,” Carlson told Auto Finance News. “This is a reflection of improved economic situation and consumers are careful to make purchase they know that they can sustain. There has been no evidence of a bubble.”
Subprime lenders are an easy target to paint as “villains,” Carlson said, but subprime loans may end up helping people to find jobs. Carlson said he expects no spikes in delinquency rates in the near future.
“We talk to lenders every day and we continue to see subprime doing very very well,” said Lou Loquasto, auto finance leader at Equifax. With all the tools that lenders currently have – such as getting instant verification of income – and as long as lenders continue to be cautious, nothing drastic is expected to happen in the subprime auto market, Loquasto said.
