Even though we reported recently that auto loan delinquency rates are on the rise due to eased lending standards, data in an Equifax report showed that the industry does have something else to celebrate. Auto loans reached an eight-year high at the beginning of this year, according to the information published this week, with loans reaching $69.6 billion in January and February alone.
The report said that in all, about 3.5 million auto loans were granted during those two months. One of the reasons behind this increase is likely the continued low interest rates from the Federal Reserve, as well as the improving economy, the Wall Street Journal said. Light truck loans were found to be in the highest demand because of the increase in home building needs, as well as the low number of used trucks.
While these numbers are far from pre-recession levels, lending and borrowing levels have improved greatly. The Journal also explained that with increased confidence, more consumers are willing to replace their old cars than in the past few years.
"Anxious consumers held onto older vehicles during the recession because of worries about their jobs and income, a trend abetted by the rising quality of new vehicles. More Americans are now starting to replace their older cars," The Journal said. "Nonetheless, the accelerating increase in demand for autos is clearly a sign of an economy on the mend."
Again, while the economy is still very much in recovery mode, this news does point to a likely increase in applications in the future. For financial institutions, credit and risk management software can help keep up with application growth, as well as help lenders determine borrowers' qualifications to prevent future delinquencies. With such uncertainty in the lending market, having extra tools can help banks stay profitable.