Late payments on car loans remain low, but there has been a shift in momentum. After several quarters of consecutive year-over-year declines, delinquency rates ticked up in the fourth quarter of 2013 to the highest levels in a few years, according to data from the Experian-Oliver Wyman Market Intelligence Reports and Experian’s IntelliView tool
The delinquency rate is the percentage of outstanding auto loans that are past due, classified by severity. In the fourth quarter of last year, 2.18% of loans were 30 to 59 days past due, 0.56% were 60 to 89 days past due, and 0.24% were 90 to 180 days past due, or severely delinquent. It’s the highest those rates have been since the same period in 2011 for the 30- to 59-day range, and the highest since 2010 for the others.
Outstanding auto loans amounted to $873 billion in fourth quarter 2013, according to the latest numbers from the Federal Reserve, up from $808.5 billion the year prior.
“The current delinquency rates combined with continued growth in auto loan originations are an encouraging sign, but serve as a reminder to lenders to regularly monitor and adjust lending strategies based on current credit trends,” Experian wrote in a weekly newsletter.
Loan delinquency rates offer insight into consumers’ ability to meet their debt obligations; as such, they reflect economic fluctuations and consumer trends.
Automotive lending has consistently led much of the consumer credit recovery in the wake of the recession. There’s a certain value an auto loan brings to a consumer’s credit profile — having a diverse credit history helps credit scores — but any unaffordable debt is cause for concern.
In most credit scoring models, payment history has the most impact on your scores. Especially for consumers with otherwise great credit, a single late payment, if reported to the credit bureaus, can trigger a massive slide in your score. If you want to see how your payment history is affecting your credit scores, you can use the Credit Report Card, a free tool that updates two of your credit scores every month.
The increase in delinquencies may not reflect well on the American consumer’s budgeting ability, it’s by no means a crisis, and the fact that less than a quarter of a percent of loans are in serious delinquency remains a strong point in consumer credit trends.
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