Auto Loan Balances Are at an All-Time High

Christine DiGangi
November 14, 2013

Auto loan balances increased more than $100 billion in the past year, with outstanding loan balances reaching $782.9 billion in the third quarter of 2013. That’s a new high for auto loan balances, according to Experian Automotive, which started reporting the data seven years ago.

Not only are consumers increasingly taking on car loans, they have continued the trend of managing them responsibly, with 30-day delinquencies at 2.58% of auto loans this past quarter; they were at 2.67% for the same quarter last year.

“The availability of credit, combined with consumers’ continued strong performance repaying their loans, has a positive spiral effect,” said Melinda Zabritski, senior director of automotive lending for Experian Automotive, in a news release about the data. “It allows lenders to slowly but surely take on additional risk while providing more access to loans and paving the way for higher auto sales.”

Loan balances are growing across the country. California, Texas and Nevada reported the highest spikes in balances (up 29.3%, 26.3% and 26%, respectively), but even states on the other end of the spectrum saw growth: Balances were up 12.4% in Hawaii, 12.3% in Wyoming and 6.8% in Michigan. At the same time, Hawaii had the sharpest decline in 30-day delinquencies (down 12.75%), followed by Vermont and Oregon (down 11.69% and 11.64%, respectively).

The report wasn’t all positive: Rhode Island saw an 18.53% spike in 30-day delinquencies — the next highest jumps came from Wyoming (up 11.98%) and Alaska (up 10.24%). Vehicle repossession rates also increased, rising from 0.4% to 0.62% of all auto loans in the past year.

In the news release, Experian noted the increase in repossessions came solely from loans serviced by finance companies, “which typically provide loans to the subprime market.”

While the 30-day delinquency rate fell and the 60-day delinquency rate held steady, the average dollar amount past due rose slightly in both categories, as did the average charge-off amount on failed auto loans. (A charge-off is when a lender writes off the amount borrowed, because they expect it won’t be paid back.)

As Zabritski noted, strong repayment behavior helps when it comes to credit availability. Consumers with good payment histories tend to have higher credit scores, which give them access to better financing opportunities, and at the same time, lenders are more willing to take on risk. Car shoppers can get a good idea of how they’ll look to lenders by reviewing their credit reports and credit scores before they step into the showroom — credit reports are available for free on an annual basis from Experian, Equifax and TransUnion, and offers a free credit-scoring tool for consumers to access their updated scores each month.

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