Auto loan delinquencies rose in the past quarter, largely because of more subprime lending, a trend that is expected to continue through the end of the year, according to a new report on Wednesday.
“I think it is natural to see some increases in delinquencies,” said Melinda Zabritski, the senior director of automotive finance at Experian Automotive, which issued the report. Experian’s data for the second quarter showed a 60-day delinquency rate of.62%, a 7% jump from the same period in 2013. Thirty-day delinquencies also increased, but only slightly, from 2.38% to 2.39%.
Repossessions, meanwhile, jumped 70% to a relatively tiny.62%.
Zabritski blamed the greater delinquency and repossession rates on an increased mix of subprime loans. Looser lending standards means that car buyers with more spotty credit histories are getting credit and, ultimately, have greater trouble repaying the money. She said the rates should continue to rise for the next few quarters. But she added that those rates were still very low not “too alarming.”
The report also showed that the total outstanding auto loan balances for the quarter reached an all-time high of $839.1 billion, up 11.7% from 2013. While banks and lenders are benefiting from the increase, Zabritski said that they also face greater risk if interest rates were to increase. Delinquencies would inevitably rise and customers would be more likely to lease cars rather than buying them.
Of the states with the highest 60-day delinquency rate, six were in the southern belt, led by Mississippi at 1.09%. New Hampshire had the lowest 60-day delinquency rate at 0.42%.