Smart Borrower Blog

Auto Lenders Take on More Subprime Borrowers


May 23rd, 2019 @ 12:13 PM by Amber Nelson


While the majority of car loan borrowers continue to have high credit scores, lenders have increased their loans to subprime borrowers over the past year, according to the Federal Reserve Bank of New York.

The New York Fed’s Quarterly Report on Household Debt and Credit for the 2019 first quarter found that those with credit scores considered subprime – below 620 – made up 20.1% of all borrowers, up from 18.9% during the first quarter of 2018.

Meanwhile those with excellent credit – scores of 760 or higher – accounted for 33% of borrowers, almost unchanged from 33.3% a year ago.

Total originated car loans rose 6.3% during the first quarter by $139 billion. That number includes both new and used auto loans and as new-vehicle sales 3.2% in the first quarter, the data suggests that more borrowers are turning to used vehicles.

Consumers are also slipping on their ability to stay current on their car loans. Serious delinquencies – loans that are late by 90 or more days – increased to 4.69% in the first quarter, up from 4.26% the previous year.

Additionally, the Fed’s report showed that total household debt has increased for the 19th straight quarter. Americans now owe $13.67 trillion in debt, up %124 billion from the 2018 fourth quarter. Household debt is now 7.8% higher than the previous peak of $12.68 trillion in the 2008 third quarter.

Most of that debt is made up of mortgage loans. Total U.S. mortgage balances climbed to $ 9.2 trillion in the first quarter, up $120 billion from the last quarter of 2018. Home equity lines of credit fell $6 billion to $406 billion.

Student loan balances grew $29 billion to $1.49 trillion. Serious delinquencies have reached 10.9% however.

Credit card debt fell by $22 billion.

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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