Experian: Lenders ‘Keep Cool’ with Subprime Risk Intake
Auto lenders are “keeping cool heads” when it comes to their risk intake of subprime and deep-subprime customers, said Melinda Zabritski, Experian Automotive’s senior director of auto finance.
Auto lenders made more than five times as many loans to super-prime customers in the second quarter — 17.9% of total auto loans and leases — while deep-subprime customers rested at 3.5%, according to Experian’s 2Q State of the Automotive Finance report released yesterday.
The subprime and deep-subprime share of new and used auto loans and leases dropped to 22.8% in 2Q, from 23.3% at the same time a year prior, according to the report. Additionally, 30-day delinquencies were up slightly to 2.22% in 2Q, from 2.19% in the year-ago period, and 60-day delinquencies moved to 0.62%, up from 0.56%.
While subprime and deep-subprime loan volume is growing, the entire market is also growing across all risk tiers, Zabritski said in the report. “In fact, the subprime loans have actually dropped as a percentage of the total market. That, combined with only a slight uptick in delinquencies, makes clear that the sky is not falling.”
Also of note, the share of new vehicles leased reached a record high of 31.4% in 2Q, up from 26.9% in the year-ago period. Used-vehicle leasing also experienced growth, moving to a 3.7% share of the market in 2Q, from 3.3% the same time a year prior.
The average dollar amount for a used-vehicle loan also reached a record high of $19,101 in 2Q, up from $18,671 in the year-ago period. Used-vehicle loans also accounted for 55.6% share of all vehicle loans in the second quarter.
“One of the biggest trends we continue to see is the shift to used vehicles by customers with excellent credit,” Zabritski said. “As vehicle prices continue to rise, savvy consumers are looking for ways to control costs. That appears to be pushing more customers toward used vehicles.”
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