By on May 16, 2013


Bad news on the subprime front, as credit rating agency Experian reports a rise in delinquencies and repossessions for auto loans in Q1 2013.

Melinda Zabritski offered a rather dubious explanation for the nearly 17 percent rise in repos (as well as the 1.3 percent uptick in 30 day delinquencies and 12.4 percent rise in 60-day delinquencies)

“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…However, one thing most lenders will agree upon is that today’s subprime borrower is less delinquent than those in the past.”

Zero Hedge, reporting on the latest data from the Fed, is reporting a nearly 24 percent rise in delinquent balances year-over-year. Experian only expects things to get worse, stating

“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.”

And still, financial institutions are happy to keep pumping out bad loans. The total dollar volume grew to $726 billion, up from $663 billion in Q1 2012. Banks increased their loan portfolios by $20 billion, finance companies by $18 billion, credit unions by $14 billion and captive finance arms by $12 billion, while but average charge-off amounts rose by 9.8% to $7,401 on each defaulted loan. But, as Experian kindly reminded us, “Charge-offs are still well below recession levels, however, as Q1 2009 average charge-offs were $10,126.”

That’s definitely reassuring news!

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10 Comments on “Auto Loan Delinquencies, Reposessions Up In Q1 2013...”

  • avatar
    sunridge place

    An interesting quote from the link that Derek didnt pull into his piece.

    ‘While repossession rates for banks, captives and credit unions are all down year over year by as much as 14.9 percent, rates for finance companies increased by 52.1’

    So, its not the major banks, credit unions, OEM captives with high repo rates. In fact, repos for those institutions are down.

    Can we assume most of these repos are on used cars from companies that only do subprime with very little risk to OEMs?

    • 0 avatar

      And if they “only do subprime,” perhaps their business model/strategy is to have buyers default so that the can be repo’d and sold again?

    • 0 avatar

      That’s a very important quote that Mr. Kreindler skipped. It directly addresses some of the very criticisms you see on this site.

      It sounds like banks, captives, and credit unions have maintained proper underwriting standards, whereas “finance companies” have not.

      There are some interesting stats on financing, as you can see from the Q4 2012 report. For example, Toyota has the largest market share of new car financing at 14%, followed by Ford at 13%. Also, Volvo financers have the highest credit rating, whereas Mitsubishi financers have the lowest, on average:

      www dot fi-magazine dot com/news/story/2012/12/finance-sources-continue-to-loosen-up-in-q3-experian-automotive-reports.aspx

  • avatar

    I’d be curious to see the figures as a percentage of the overall subprime portfolios. Subprime lending took such a nosedive during the recession that its defaults would have to have fallen by the simple fact that there were fewer loans to go into default; I wonder how much of the uptick in defaults can be tied to the simple fact that there’s not more subprime paper.

  • avatar
    Felix Hoenikker

    Anecdotal data point.
    I use a local credit union for free ATM withdrawals. One part of the parking lot is used to display the latest repos. In 2009, 2010 and 2011, there always seemed to be one of two repos displayed when I stopped by on Saturday afternoon. However, over the past two years, there were very few repos there.
    That would support your theory that OEM lenders are not seeing the rise in loan deliquencies.

  • avatar
    John Franklin Mason

    This is a rather “dubious” article. It’s becoming apparent to me “The Truth About Cars” is inclined to be rather loose with facts.

  • avatar

    Rwanda’s debut bond on international markets was a resounding success, as investors oversubscribed the offer 7.5 times.

    Issued on April 25th for a total of $400 million (€307.5 million), payable over ten years at an interest rate of 6.875 percent, the loan has far exceeded the government’s expectations, generating more than $3 billion.

  • avatar

    A local loan company has been advertising “Bankruptcy? Repossession? Liens? Sub 500 credit score? We will put you in a car!” I’ve got to believe either they’re charging Vinnie the Legbreaker interest, or have a 7 minute grace period before the car is yanked and resold. Somehow they’ve found a formula for profitability.

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