Delinquency rates are down for the auto finance industry overall, but captives and banks are showing increased rates, Melinda Zabritski, Experian’s senior director of automotive financial solutions, told Auto Finance News.
Industry-wide 30-day delinquencies dropped to 2.1% of total loans outstanding in 2Q18 compared with 2.2% a year ago. Meanwhile, 60-day delinquencies fell to 0.64% from 0.67% over the same period.
“Regarding the high-level macro number, delinquencies improved,” Zabritski said. “But that improvement was driven by a sharp decrease with the finance companies and decrease loss with the credit unions.”
Finance companies’ 30-day delinquencies decreased to 3.7% compared with 4.3% during the same time last year. Additionally, credit unions experienced a drop in delinquencies to 1.2% compared with 1.3% in 2Q17. Both finance companies and credit unions managed to lower late-stage delinquencies as well.
However, the captives and banks are still showing delinquency rate increases, Zabritski said. Those rates are starting to taper off as lenders reduce their subprime originations, which naturally leads to lower delinquencies.
“We’re not quite there with the captives and banks, but maybe in the next quarter or so [they too will see delinquencies fall],” Zabritski added.
Delinquencies 30 days past due increased to 2.14% for captives, compared with 2.08% last year. As for banks, the 30-day delinquency rate increased to 1.88% compared with 1.71% during the same time the previous year.
The industry has experienced a pullback in the subprime space for a while now. However, there are operational reasons behind a reduction in subprime. “For banks, it’s about right-sizing,” Zabritski said.
By right-sizing, Zabritski means that banks are looking at their portfolio and reevaluating how to strategically reduce share in auto originations, which helps large regional banks keep the auto portion of their balances in line with strategic plans.
