Auto Loan Delinquencies Continued to Climb in the Last Quarter

Matt Posky
by Matt Posky
auto loan delinquencies continued to climb in the last quarter

The 60-day auto delinquency rate continued to climb through the third quarter of 2017. Driven primarily by “relaxed” underwriting standards from years past and increasing subprime originations, TransUnion’s senior vice president and automotive business head, Brian Landau, said two-month payment lapses rose 7 basis points to 1.4 percent.

At the same time, the average balance of outstanding auto loans increased by around 5.9 percent, resulting in the lowest year-over-year growth rate since the third quarter of 2012. The group’s Industry Insights Report cited this quarter’s serious auto loan delinquency rate as the highest observed since Q3 2009 — you know, when nobody had any money to pay their bills.

New business was also down. Subprime, near-prime and prime loan originations were down almost 6 percent for the third quarter. However, TransUnion explained to Automotive News that the blow was offset slightly by a 3.2 percent increase in prime-plus and super-prime originations.

“Despite fewer originations, there is evidence that more people will be opening auto loans in the near term,” Landau said. “In September, U.S. light-vehicle sales increased for the first time this year on an annual basis. Also, there will likely be several thousand new vehicles purchased as a result of the hurricanes in Florida and Texas.”

Be that as it may, it doesn’t account for the growing number of subprime loans or how many of those are now categorized as “ deep subprime.” It also doesn’t solve the problem of people defaulting on car payments. Increased sales is great for the industry, but doesn’t guarantee individuals will be able to afford those purchases down the line.

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  • Sirwired Sirwired on Nov 22, 2017

    Seven basis points (a basis point is 0.01%) is a rounding error; a blip. Hardly headline material. With subprime loans regularly clocking interest at 8+% interest, I don't think anybody's losing sleep over 1.4% delinquencies.

  • Dougjp Dougjp on Nov 22, 2017

    Bubble bubble, toil and trouble. I remember it like yesterday, but it was so so long ago everybody forgot what happens to the economy after "subprime". And way back then....oops! It was less than 10 years ago! Just before it TANKED, people were saying there's no problem at all. We are fine! ;) Seriously, I kid you not!

    • FreedMike FreedMike on Nov 22, 2017

      The auto loan market isn't going to tank the entire economy if it goes down.

  • SoCalMikester SoCalMikester on Nov 22, 2017

    theres going to be a "correction". always is. i tend to buy stock in "distressed" companies (real, or imagined thanks to the press)and hold until they recover. VW, kobe steel, kroger. not sure a correction will even hurt them much. when it happens, thens the time to double-down on your 401k. i dont think car loans to roaches is going to trigger it. its going to be techy or bitcoiney or an unknown unknown like enron.

    • See 4 previous
    • TMA1 TMA1 on Nov 27, 2017

      The PC term is "credit criminals."

  • Danio3834 Danio3834 on Nov 22, 2017

    Now isn't the time to panic, but this is an indicator. When the average car loan term exceeds the average length of ownership, eventually the negative equity snowball will avalanche and kill us all!