The industry’s increasing pace of delinquencies has begun to “taper off,” Melinda Zabritski, senior director of automotive financial solutions at Experian, told Auto Finance News.
The industry began pulling back originations and tightening credit in the third quarter of 2016, she said. Given that the majority of delinquencies occur in the first 18 to 20 months of the life of the loan, Zabritski predicts that lenders will start to report lower year-over-year delinquencies in the next one to two quarters.
“We’re still seeing some increased delinquency year over year, but the reason we’re seeing that taper off is that now for the last year we’ve been reducing the focus on subprime,” she said. “That will have the impact of continuing to see decreases in delinquency, because there just isn’t as much subprime paper on the books.”
Still, delinquencies rose mildly in the third quarter, according to the latest Experian report. Total loans and leases 30 days past due as a percentage of balances had only a 1 basis point rise.
Independent finance companies and credit unions lowered their delinquency rates, but were offset by rising delinquencies from banks and captives.
Delinquencies 60 days or more past due also rose, to 0.76% of total loan and lease balances from 0.74% during the prior-year period.
In the coming year, Zabritski expects to see some of the results of all the credit tightening lenders have been talking up, “but of course what is likely going to happen is that delinquency will go down, and then risk appetite will open up again,” she said. “Lenders will dip back into subprime.”