Auto loan delinquency and reposession rates are dropping fast, according to a new study.
Auto buyers are doing “an excellent job” of keeping current on their loan payments, a significant improvement from just a few years ago when delinquencies and repossession rates were soaring, noted a major credit tracking service.
Experian Automotive reports consumers continued to make timely automotive loan payments during the second quarter of 2012, lowering the average delinquency rate across all lending organizations, including banks, captive finance arms, finance companies and credit unions.
The falling delinquency rate has encouraged automakers to take on more “sub-prime” loans in recent months, broadening the industry’s sales base. It’s also helped reduce losses at companies such as Ally Bank, formerly GMAC, Ford Motor Credit and GM Financial and other captive auto finance companies.
The new report serves up some good news for lenders and consumers alike, especially when there are worrisome signs that home foreclosures are again on the rise.
Experian analysts indicated the 30-day delinquency rate was 2.52%, compared to 2.59% during the second quarter of 2011, and the 60-day delinquency rate was 0.58% in Q2 2012, down from 0.60% in second quarter of 2011.
Vehicle repossessions also dropped, coming in at 0.43% in the second quarter 2012, compared to 0.59% in same period a year ago which is a 27.9% drop year-over-year, according to Experian.
“Consumers continue to do an excellent job of paying back their vehicle loans in a timely fashion, and that’s good news for everyone in the industry,” said Melinda Zabritski, director of automotive lending for Experian Automotive. “Both 30- and 60-day delinquencies are at historic lows, and the percentage of money at risk has dropped as well. This gives lenders needed stability, which filters through the auto industry to consumers in the form of easier-to-obtain loans.”
Total balances of loan portfolios also rose for all types of lending organizations in Q2 2012, reaching $682 billion, compared to $646 billion in Q2 2011.
Despite this strong growth, overall loan balances still lag behind pre-recession levels. In Q2 2007, outstanding loan balances reached $701 billion.
“Automotive loan portfolios continued their strong comeback in Q2 2012, as delinquencies continued to drop and total dollar volumes continued to rise,” Zabritski said. “Since the automotive loan industry is highly interdependent between banks and retailers, this continued strong performance for loan portfolios is good for automotive retailers and consumers alike,” Zabritski said.