Fed Reports Auto Loans at Six-Year High, Average Balance Up, Delinquencies Down

According to a report issued last week by the U.S. Federal Reserve Bank of New York, car and light truck loan originations have reached a six-year high. Automotive News reports that for the second quarter of 2013, new loans went up 11% to $91.8 billion, including consumers with all credit ratings. U.S. light vehicle sales were up 9% for the quarter from last year.

The Fed said that the biggest year to year change was in the 621-660 credit score range, just below “prime” rankings. That tranche rose 16% to $12.1 billion. Loans to those with worse credit, a score below 620, were up ~11% from 2012 to $21.2 billion.

Among all loan originations, according to the Fed report, the biggest year-over-year percentage increase was in the 621 to 660 credit score range, just below prime risk, which rose 16 percent in the second quarter to $12.1 billion. Loans to borrowers with credit scores of 620 or below increased about 11 percent from a year ago to $21.2 billion.

Loans are only now reaching what the Fed describes as normal levels following the financial crisis of 2008. “While originations to borrowers with the lowest credit scores have increased, they are just recently approaching historically normal levels and are below those that we saw during the boom years leading up to the crisis,” the report said.

Total auto loans exceeded the previous quarter for the ninth successive financial quarter since Q3 of 2008, with more than $800 billion borrowed.

Average loan balances have risen to $13,435, up 4.5% from 2012 and up 1.3% from the previous quarter. As those with less than prime credit ratings return to the market, their loans, which tend to have higher initial balances, are putting upward pressure on the average balance.

Though less creditworthy customers are borrowing more money, they appear to be making their payments. Payments that were at least two months in arrears were flat from last quarter, going from 0.79% to 0.80% of car loans, according to the TransUnion credit agency. Both of those figures were down from 0.88% in the first quarter.

Peter Turek, TransUnion’s VP, said the data was good news. “It’s encouraging to see consumers take on more auto debt while delinquencies remain low.”