Auto delinquencies dropped and should remain low in 2014 according to the American Bankers Association.
Auto loan delinquencies of more than 30 days dropped from 2.08 percent to 1.64 percent in the third quarter of 2013.
Keith Leggett, American Bankers Association’s senior economist, said that a low auto delinquency rate is a good indication that lenders will make their loans more available in 2014. He also said auto delinquencies will soon begin increasing but perhaps not any time this year.
Meanwhile, auto auction giant Manheim reported recently that used-car prices are expected to stay strong even if they experienced a decline in the last quarter of 2013. Tom Webb, Manheim chief economist, told Automotive News that restrained new-vehicle incentives and certified pre-owned sales growth help strengthen used-vehicle prices.
Strong used-car prices reduce auto loan delinquencies as some borrowers who are behind their payments sell their cars to pay off their loans and avoid defaulting.
On the other hand, the increasing number of subprime borrowers and relaxed credit standards will cause auto delinquencies to rise, said Leggett.
In the meantime, longer loan terms make higher loan amounts more viable for consumers.
The average term for new-car loans in the third quarter of 2013 went up from 64 to 65 months according to Experian Automotive. The average amount financed for new cars increased by $750 to $26,719. The monthly payment averaged at $458, up by $6 from the same period in 2012.