Direct Delinquencies Spike

Late payments on direct auto loans shot up 98 basis points in the first quarter — nearly 50% — the highest jump for any asset class tracked by the American Bankers Association.

First-quarter direct-auto delinquencies were 3.01%, compared with 2.03% in the final quarter of 2008.

In general, ABA Chief Economist James Chessen said the higher delinquencies are a result of rising unemployment. “The No. 1 driver of delinquencies is job loss,” he said, adding that “delinquencies won’t improve until companies start hiring again and we see a significant economic turnaround.”

What’s interesting, though, is that indirect auto delinquencies fell 11 basis points, to 3.53%.

I’m not really sure how to explain the discrepancy. From the first quarter of 2000 through yearend 2008, direct auto-loan delinquencies averaged 2.09%. Until last quarter, the highest-ever delinquency rate was 2.56% (in 3Q01).

There’s been some discussion on this site about the fact that direct lending is less risky than indirect. But maybe this new data turns that discussion on its head.