Auto Loan Delinquencies Rise: Experian Automotive

As the economy struggles, automotive loan delinquencies are increasing, putting nearly $25 billion in loans past due, according to figures released by Experian Automotive, a part of Experian, at the Automotive Finance Summit here today.

Experian Automotive presented a comprehensive overview of automotive lending trends based on a quarterly analysis of the market from the second quarter of 2006 through the second quarter of 2008. The analysis found that loans 30 days past due were up 9 percent year-over-year in the second quarter of 2008, while loans 60 days past due were up 11 percent. Currently, 2.48 percent of all automotive loans are 30 days past due, compared with 2.28 percent in the second quarter of 2007. Automotive loans 60 days past due rose to 0.75 percent from 0.67 percent. 

“The economy continues to force lenders to tighten their loan criteria while consumers are faced with increased difficulty in repaying those loans on time,” said Scott Waldron, president of Experian Automotive. “Our data has shown a clear pattern of rising past-due loans in the auto industry, where even a slight increase in delinquent loans severely affects the industry by accounting for hundreds of millions of dollars in unpaid debt.”

Consumer credit also has worsened in the past two years, with the percentage of prime automotive loans (680 credit score and above) falling by 8 percent. In the second quarter of 2008, 56.5 percent of all open automotive loans were to people with prime credit, down from 61.1 percent in the second quarter of 2006.

“It is important for financial organizations to track these trends to evaluate how current economic forces are specifically impacting their loan portfolios,” said Melinda Zabritski, director of automotive credit for Experian Automotive. “Using outside information and analysis can help lenders understand unique credit patterns in local markets and how these subtle nuances can impact financing in one city versus another.”

In other findings:

• Market share for captive finance companies (those owned by auto manufacturers) has fallen from 31.1 percent of all loans opened in the second quarter of 2006 to 25.2 percent of all loans opened in the second quarter of 2008
• As auto sales have fallen, total loan originations have dropped by 14 percent
• Banks have become more cautious in their overall lending, dropping their percentage of below subprime loans from 15.7 percent in the second quarter of 2006 to 9.7 percent in the second quarter of 2008
• Finance companies specializing in automotive loans have picked up the below subprime market share from banks, growing their below subprime portfolios from 15 percent in the second quarter of 2006 to 24.6 percent in the second quarter of 2008
• Below subprime is the fastest-growing automotive loan segment, increasing from 9.4 percent in the second quarter of 2006 to 13.4 percent in the second quarter of 2008

A credit trend analysis detailing Experian Automotive’s findings can be downloaded at www.experian.com/forms/trend_analysis.html.
 
About Experian Automotive
Experian Automotive, a part of Experian, delivers information services to manufacturers, dealers, finance and insurance companies, and consumers. Experian® helps automotive clients increase customer loyalty, target and win new business, and make better lending and vehicle purchase decisions. Its National Vehicle Database — housing more than 500 million vehicles — and Experian’s credit, consumer and business information assets meet the industry’s growing demand for an integrated information source. Experian’s advanced decision support services help clients turn this information into improved business results. Experian technology supports several top automotive Web sites, including eBay Motors, CarsDirect.com, CarMax.com and NADAguides.com. For more information on Experian Automotive and its suite of services, visit our Web site at www.experianautomotive.com.