Auto-loan delinquency rates plunge

Auto-loan delinquency rates in the United States have fallen to their lowest point in at least a dozen years, according to risk management firm TransUnion.

The percentage of borrowers who are at least 60 days past due on their vehicle payments fell to 0.36 percent in the first quarter of 2012, TransUnion says. That's the lowest rate since the firm started reporting the data in 1999.

Compared with the first quarter of last year, delinquency rates dropped almost 27 percent from 0.49 percent . From the fourth quarter of 2011, rates fell nearly 22 percent from 0.46 percent.

"Auto loan delinquencies continue to perform exceptionally," said Peter Turek, automotive vice president of TransUnion's financial services unit, in a statement.

Turek said he expects auto-loan delinquencies to remain low for the rest of 2012 because rising U.S. demand for new and used vehicles has spurred an increase in lending and leasing.

Still, Turek cautioned that "a slight increase from this record-low level would not be surprising and should not be construed as a negative event, as lenders continue to originate more loans to consumers across all credit risk levels."

Auto delinquency rates dropped in 43 states from the fourth quarter of 2011 to the first quarter of 2012, TransUnion reported. Last quarter, Montana had the lowest loan delinquency rate in the country at 0.15 percent. Mississippi, with a 0.77 percent delinquency rate, was the highest in the nation.

You can reach Joseph Lichterman at jlichterman@crain.com. Related LinksReaders are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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What about low interest rates for high mpg?

Jamie LaReau covers auto dealers for Automotive News.

LAS VEGAS -- Imagine if buying a vehicle that gets extremely good fuel economy meant getting a lower interest rate on a loan.

Lenders consider a lot of factors when granting consumers retail vehicle loans. But might lenders smile on buyers of highly fuel efficient vehicles, such as the Chevrolet Volt or Toyota Prius sedans?

The thought is that a consumer of a high-MPG vehicle would, theoretically, be spending considerably less on gasoline. Therefore that consumer could repay a car loan faster or even afford a slightly higher loan amount than they might otherwise.

It’s an idea that some dealers are asking and some in the lending community are pondering at the National Automobile Dealers Association convention.

“We’re not seeing it happen quite yet,” said Melinda Zabritski, director of Automotive Credit at Experian Automotive. “It’s certainly going to be one of the topics I’m going to talk to lenders about it though -- if they’ll take mileage into account when writing their rate cards.”

The answer might depend on federal regulations. The government could say no.

And there are the unpredictable variables to consider such as the risk that gasoline prices would fluctuate. According to a report by ABC News, Patrick DeHaan, senior petroleum analyst for GasBuddy, which tracks fuel prices, projects that by Memorial Day the national average will be $3.86 to $4.13 per gallon. DeHaan said prices in 2012 could set records. That means drivers could spend $200 to $300 more for gasoline this year -- unless they buy an extremely fuel efficient vehicle.

I ran into Ally Financial President Bill Muir here and asked his thoughts on the idea of lending at more favorable rates for those who buy vehicles with high MPG ratings.

Muir says it’s unlikely Ally would start considering a vehicle’s fuel economy in its retail loan interest rates. Muir says fuel efficiency is already inadvertently rolled into the equation through residual values.

He noted that in 2008 gasoline prices hit $4 a gallon. Large SUVs became harder for people to afford. Thus, the residual values on many large SUVs plummeted because the used vehicle buyer wanted to pay less for them.

“Mileage per gallon factors into affordability and factors into the residual of the vehicles,” Muir said. “We tend to look at it as, what do we think is the residual value that makes it desirable or not as a loan. So it all factors into it already.”

Fair enough. But lenders are always looking for creative ways to market to new business, and this might be one of them.

You can reach Jamie LaReau at jlareau@crain.com.
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Subprime competition heats up as rates fall

Jim Henry
Automotive News -- December 7, 2011 - 8:43 am ET

Subprime auto loans keep growing, with competition heating up in the segment and interest rates edging lower for the riskiest customers, according to Experian Automotive.

"If you talk to some of the lenders, they say some of the larger subprime lenders are buying deeper, putting out more competitive rates," said Melinda Zabritski, Experian's director of automotive credit.

"That pushes the bigger lenders to do the same," she said last week.

That should be good news for dealers, who have complained that the comeback in subprime continues to lag the rebound in prime-risk loans.

Zabritski, during a Dec. 1 conference call, reviewed several positive trends in auto loans for the third quarter:

• Delinquencies and repossessions were down as a percentage of the total. For the industry, the average amount charged off per repossession was down 10.7 percent, to $6,820, Experian said.

• The average amount financed rose for new and used vehicles. (See table)

• Leasing was even with the year-ago quarter, at 22.7 percent of all new-vehicle financing, Experian said. That was up from only 14.2 percent in the third quarter of 2009.

Subprime loans made up 21.9 percent of all new-vehicle loans originated in the third quarter, up from 19.1 percent a year ago. For used vehicles, subprime made up 51.6 percent of loans, up from 48 percent a year earlier.

Zabritski said it was a year ago, in the third quarter of 2010, that subprime loans increased their share of total loans for the first time since the recession began.

"Ever since then, we've seen subprime increase," comparing quarters year-over-year, she said.

Interest rates were down for auto loans across all risk categories, according to Experian. In the prime-risk segment, it's likely that incentives played a role in bringing down the average interest rate, Zabritski said.

In the subprime segment, incentives were unlikely to be a factor, she said.

Subprime rates had more room to decline because auto lenders raised those rates more when credit was tight, she said.

For new vehicles, the average interest rate was 4.55 percent, down from 4.98 percent a year ago. For used, the average was 8.6 percent, down from 8.83 percent.

"We are certainly seeing the biggest [rate] decrease in these higher-risk areas," Zabritski said. "These did see increased rates when the market tightened."

You can reach Jim Henry at autonews@crain.com. Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Automotive News. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification.

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