Auto Loan Origination Growth Takes a 9-Year Tumble
Feb 28th, 2018 @ 9:12 PM by Amber Nelson
Americans bought fewer vehicles in the fourth quarter of 2017 than the previous year, according to the New York Fed Household Debt and Credit Report, with the biggest annual decline in close to a decade.
During the 2017 fourth quarter, there were $142 billion in auto loans and leases originated for new and used cars and trucks. That is a 3.4 percent decrease from the 2016 fourth quarter and the largest yearly drop since the fourth quarter of 2009 when originations plummeted 8.7 percent.
Auto loan and lease originations have fallen or grown by less than 1 percent on an annual basis during five out of the past seven months. Sales and loan originations have not been so stagnate since the months leading up to the Great Recession. That does not bode well for 2018 car loan figures.
Part of the decline is due to a drop in new-vehicle sales, which fell 1.8 percent in 2017 to 17.2 million, according to data from Automotive News, a decrease from 17.6 million in 2016.
Yet 2016’s vehicle sales were still a record high. And in dollar amounts, 2017 auto loan originations amounted to $568.6 billion, up 0.7 percent from the previous year, according to the New York Fed, and total outstanding car loans and leases totaled an all-time record high of $1.2 trillion.
While auto loans and leases are near historic highs, the past year has shown them to be slowing and car loan delinquencies have been rising. As of December 31, 4.1% of all auto loan balances were delinquent by 90 days or more, a five-year high.
In response to rising delinquency rates, auto lenders have been tightening their underwriting standards slightly, requiring higher credit scores on prime and non-prime loans. The median credit score for a U.S. car loan rose 2 points to 707, a six-year high in the 201 fourth quarter, but those stricter requirements may not stay in place for too long if sales and auto loan originations start to falter.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.