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Auto Loan Debt Rises (But Many Borrowers Still Pay Late)

2806609520_799e948b55_zAuto loan debt per borrower has increased in the first three months of 2014, latest TransUnion report shows. But auto loan delinquency rate has likewise risen from the previous year.

TransUnion data shows that a borrower takes on an average of $16,862 of auto loan debt in the first quarter this year, up 4.1 percent from $16,191 in the same period last year.

The credit-reporting agency’s vice president of automotive, Peter Turek, said, “The continued increase in auto loan debt is a healthy sign that auto sales and the auto loan market continue to perform well.”

U.S. car buyers have more purchasing power in the recent years when fuel prices stabilized, interest rates went down, and credit became more available.

But the number of borrowers who fell behind their payments by 60 days or more has also risen early this year. The auto loan delinquency rate is now one percent, up from 0.95 percent in the first quarter of 2013. But it is down from 1.14 percent in the previous quarter and below 1.10 percent, the average for the January-March period since 2008.

Moreover, the rate of late payments among subprime borrowers (consumers with credit scores below 641 on the VantageScore 2.0 scale) increased from 5.11 percent in 2013 to 5.52 percent this year. The share of auto loans originated to that group has also expanded from 2012 to 2013.

Turek said, “Auto loans to the subprime population are growing as are delinquency rates for that group, but as an industry the level of risk is well managed.”

The largest increases in delinquency rate occurred in Alaska, Arkansas and Michigan. Eleven states, however, experienced declines with the largest in Oregon, Hawaii and California.

Photo credit: wsssst / Flickr / CC BY 2.0




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