Auto Delinquency Rates Rise 9% in Q4
Credit reporting agency TransUnion has released its analysis of the US’ auto loan situation and finds that, unsurprisingly, things have deteriorated. “The national 60-day auto delinquency rate (the ratio of auto loan borrowers 60 or more days past due) edged upward between the third and fourth quarter of 2008 from 0.80 percent to 0.86 percent. Year-over-year the delinquency rate increased 8.86 percent in the fourth quarter.” That works out to about one out of 116 auto loans being delinquent. “Delinquencies were highest in Mississippi, at 1.62 percent, followed by California, at 1.46 percent, and Louisiana, at 1.37 percent. The states with the lowest auto loan delinquency rates were Alaska, at 0.19 percent, North Dakota, at 0.34 percent and Wyoming, at 0.41 percent.” Oddly enough, these delinquency rates by state only roughly track unemployment rates.
Alaska, for example, has a relatively high unemployment rate but the lowest delinquency rate. TransUnion forecasts that the delinquency number will edge up to 1.13% by the end of this year. Meanwhile, total auto loan debt outstanding is trending down ever so slightly (down 0.2%) as some people delay taking on debt to buy a new vehicle. Considering all the sturm und drang in the media you would think that cars are being repossessed at a breakneck clip. Yet even if TransUnion’s forecast comes true, only about one in 92 car loans will be seriously in arrears. Not good but not the end of life as we know it.
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@no_slushbox I was also thinking that these delinquency rates (if true) are quite low. Probably connected with the American adage, "You can live in your car, but you can't drive your house." For those outside the U.S.: The choice for most of us is, own a reliable car or have no means of obtaining income (or groceries). Even if checks were to turn up in one's mailbox, few Americans would be able to turn them into groceries without a car. Pretty much proves the point that cars are more important than housing in U.S. society.
johnthacker : "Seriously, pleasant warm weather seems to be correlated with higher delinquency rates." An excellent point, I completely missed the geographic correlation. Michigan has the US' highest unemployment rate, but didn't make the top three in auto loan delinquencies.
Of course the Federal Government is not promising to bailout car note debtors, unlike mortgagors.
@johnthacker Way off base. Alaska's low delinquency rates are related to the relatively low impact of the current economic crisis onto greater Alaska. Alaska benefits from a small population base, strong socialized structure for many segments of the population and an economy based on energy, military, cargo and tourism. We're already seeing the collapse of the social and government structures in western Alaska where the unemployment is high and seasonal. These are areas that don't have running water let alone cars. Look for those delinquency rates to climb in the main population centers if the downward price pressure continues in the energy sector. Tourism, cargo and fishing industries are also trending downward.