U.S. auto loan delinquencies are up in the first quarter of 2013—and this is primarily because of more subprime borrowers falling behind on their auto loan payments.
According to credit reporting agency TransUnion, the delinquency rate of auto loans more than 60 days past due rose to 0.88 percent from 0.82 percent year on year.
But the delinquency rate among subprime borrowers alone showed remarkable growth to 5.50 percent in the first quarter of this year from 5.09 percent in the same period in 2012.
TransUnion Vice President of Automotive Peter Turek said, “We’ve been monitoring the auto loan landscape closely for some time to see if increased subprime lending would start pushing delinquency rates up.”
The agency found that the share of subprime borrowers in the auto lending market was steady at 15 percent in Q1 2013, about which Turek said “there has not been a dramatic effect to the overall delinquency rate.”
However, a movement in the subprime category contradicts that finding. Subprime auto loan account balances grew by 6.6 percent to $12,006 this year from $11,266 last year.
“While the auto loan market has been performing exceptionally well the last few years, there is some concern about the subprime market,” Turek said.
“On one hand, subprime borrowers make up a smaller percentage of the overall market and their delinquency rates are actually the same as they were two years ago. However, their account balances have risen more than $1,200 in that same period placing more of an economic burden on lenders if they were to go delinquent.”