Smart Borrower Blog

Auto Lending – and Late Payments – Increase in First Quarter


May 15th, 2013 @ 7:13 PM by Amber Nelson


Looser lending standards likely contributed to a jump in late car payments and repossessions in the first quarter, according to data from Experian Automotive.

The number of auto loan borrowers who were delinquent on their payment by 30 days or more in the first quarter rose 1.3 percent from the same quarter in 2012, and delinquencies of 60 days or more climbed 12.4 percent.

Repossessions soared even higher with a 16.9 percent increase to 0.50 percent from 0.43 percent from the year before. By comparison, repos reached a peak in the first quarter of 2010 at 0.71 percent.

“Obviously, we never want to see a rise in delinquencies or repossessions, but when you compare the current findings with previous years, they are still lower than the recession-level rates,” said Melinda Zabritski, Experian’s senior director of automotive credit in a press release.

After the financial crisis, repos skyrocketed and lenders tightened up on their loan requirements, denying all but the most creditworthy borrowers. As things in the auto industry have picked up over the past two years, lenders have started making more loans to borrowers with less than perfect credit. Total lending has increased as well. Borrowers held a total of $726 billion in car loans in the first quarter, up 9.6 percent from $663 billion one year earlier.

“As we continue to move forward, we should start to see more increases as some of the subprime loans coming onto the books begin to deteriorate,” Zabritski continued. “However, one thing most lenders will agree upon is that today’s subprime borrower is less delinquent than those in the past.”

Still, an increase in delinquencies and repos is cause for watchfulness in the coming months. Lenders have had to write-off more of their loans in the first quarter as delinquent loans go uncollected. Average charge-offs for defaulted loans rose to $7,401 from $6,739 in the first quarter of 2012. And while both numbers are below the recession peak of $10,126, rising delinquencies could signal a trouble spot in today’s delicate economy.

 

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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