Auto Delinquencies Post Slight Seasonal Rise

There were more auto loan borrowers behind on their payments during the third quarter of this year compared to the previous quarter, but the small uptick is nothing to worry about, according to credit reporting agency TransUnion.

The percent of customers who were late by 60 days or more on their car payments rose to 0.47 percent between June and September, up from 0.44 percent in the second quarter. The new rate is still part of a downward trend, as it is down from 0.58 percent one year ago.

TransUnion reports that auto delinquencies typically rise in the third quarter each year, as new auto loan borrowers usually buy cars in the second or third quarters.

“Typically, you really don’t see the impact on your household budget until the second or third payment, so if you don’t plan for it, you could get a little sticker shock,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit as quoted in a BusinessWeek article.

The good news is that even though late payments were up slightly in the third quarter, overall the delinquency rate is close to historic lows. Before the recession, the average rate was between 0.55 percent and 0.71 percent. The numbers peaked in the fourth quarter of 2008 at 0.86 percent.

It is impressive that late payment rates are staying low even as the number of new loans written is rising and the average car loan amount is growing . The average car loan amount rose to $12,902, up from $12,689 in the second quarter and $12,500 the year before.

“The number of new auto loans coming on the books has continued trending upward since the end of the recession. A primary driver of this is relaxed lending policies of creditors,” said Turek in a MarketWatch press release . “However, on a year over year basis, delinquencies have now dropped for eight consecutive quarters even in the face of increased lending to the subprime market.”