Auto Loans Top Record $1.33 trillion
Feb 25th, 2020 @ 1:27 PM by Amber Nelson
The total amount of car loan debt hit a new record high in the 2019 fourth quarter, according to the New York Federal Reserve, but delinquencies are also on the rise.
Total outstanding U.S. balances on auto loans and leases rose to $1.33 trillion during the last quarter of 2019, up almost 5% from the year before and $16 billion from the previous quarter.
The average price for new vehicles increased as well growing to $37,200 in 2019, up from $28,600 a decade earlier.
The New York Fed also reported that 85% of new cars in the U.S. are financed with loans or leases. Per household, car loans make up 7.4% of all household debt.
Even though auto debt is a small share of most Americans’ monthly debt, auto loan delinquencies still rose over the past year. Serious delinquencies – loans that are overdue by 90 days or more – climbed to $66 billion, or 5% of all loans. That’s up from $57 billion a year ago. The percentage of loans that moved into the serious delinquency category inched up to 2.36% from 2.34% in the 2019 third quarter.
Subprime borrowers – those with credit scores between 501 and 600 – accounted for less of all debt though, making up only 22% of all borrowers in the fourth quarter, compared to 24% a year earlier. The average car loan for subprime borrowers was $30,633 in the third quarter with an average monthly payment of $574.
Even though delinquencies have been rising, investors have continued to buy up the riskier subprime auto loan bonds. New subprime “junk”-rated bonds sold as at yields as low as 3.5% this month as prices, compared with highs of 9% four years ago. Demand for these higher risk bonds has been high as investors expect the U.S. economy to continue its 11th straight year of expansion.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.