Auto Loan Delinquency Data
Last year proved to be a major year for car loans, with more consumers applying for loans than in the past and more banks easing their lending standards to comply. Some banks – including Wells Fargo – have announced that this year will be even bigger, and others are looking to auto loans to improve their balance sheets, based on these loans’ low default rates. However, new data has shown that the delinquency rates of auto loans actual increased in the fourth quarter of last year.
According to a press release from Experian Automotive, 60-day auto loan delinquencies increased from 2011, the first time there has been a year-over-year increase since 2009. However, 30-day delinquencies declined since the previous year.
Even with these statistics, both the press release and a Yahoo article point out a positive side from this news.
“Overall, our Q4 analysis shows that the auto lending market is extremely healthy,” said Melinda Zabritski, director of automotive credit for Experian Automotive, in the release. “Of course, you never want to see an increase in delinquencies, but when you take a step back and look at the market compared to where it was three years ago, we still have remarkable stability.”
Yahoo also explained that this data, besides simply showing an increase in loans from past years, also means that banks are more willing to lend to subprime borrowers, something that has changed only recently. If loans are defaulting, the banks that at one time required each borrower to have only the highest level of credit and the best history would be able to take out a loan – something that was hurting the overall economy with low levels of lending.
At the same time, though loans are on the rise, this also means that credit and risk management tools are more important than ever. With growing loan originations, using tools to lend to qualified borrowers can help increase the number of loans made, while also ensuring that banks can remain profitable.
