Delinquencies Inch Up, Thanks to Subprime Growth, Experian Says

Automotive loan delinquencies grew in the third quarter, with 30-day delinquencies up 3.7% from the previous year, while 60-day delinquencies jumped 8.6% during the same time period, according to Experian Automotive’s State of the Automotive Finance Market Report, released today.

“While we have observed a rise in delinquencies over the past few quarters, it was to be expected due to the growth in subprime loans.” Melinda Zabritski, Experian’s senior director of automotive credit, said in a press release. “We have to keep in mind that a majority of the market is still in the prime risk category. As long as consumers continue to do a good job of making their auto loan payments on time and lenders keep a close eye on how rates fluctuate year over year, the industry should remain relatively stable. Understanding the shifts in payment behavior and the industry’s risk tolerance are important for the market because these insights can trigger actions that affect vehicle prices, loan terms or interest rates.”

Southern states took the top four spots in both the 30-day and 60-day delinquency categories, with Mississippi yielding the highest growth in 30-day delinquencies (4.49%), and the second-highest jump in 60-day delinquencies (1.36%). On the flip side, the report read, states with the lowest delinquency rates in both categories primarily resided in the Midwest and Northwest regions.

The report also found that total balances for all open auto loans grew to $870 billion, up from $784 billion a year ago, and subprime loans accounted for 20.6% of total loans in Q3 2014, up from 20.26% the prior year. Deep subprime loans also saw a slight increase, up 3.84% in the third quarter from 3.57% at the same time last year.