Delinquencies among independent auto finance companies are “considerably higher” than their bank and credit union peers and are continuing to rise, according to data released by the Federal Reserve Bank of New York on Tuesday.
While banks and credit unions have seen 90-plus day delinquency rates come down since 2014, delinquencies at auto finance companies have “sharply increased” by 2 percentage points, according to the Federal Reserve’s Liberty Street Economics blog.
“This suggests that bank auto loans may have some additional layers of underwriting — credit score alone does not explain the gap and divergence in the delinquency rates,” the authors wrote.
The overall industry delinquency rate for accounts 90 days or more past due rose only “slightly” to 4% of auto loan balances. However, that rate masks the “sharp rise in subprime delinquency, which is diluted by the increase in prime loans with better performance,” the authors wrote.
Auto loans also continue to rise as a percentage of household debt, according to the report. Auto debt rose 1.9% in the quarter — the second highest driver of debt behind credit cards. Through the third quarter, consumers have added $78 billion of auto debt across the industry.
