Subprime Loan Percentage Falls to Lowest Level in Three Years
SCHAUMBURG, Ill. — In 2015’s first quarter, the percentage of automotive loans that fell within the subprime and deep subprime risk categories made up 19.7% of the market — the lowest share since 2012, according to Experian Automotive.
The firm’s State of the Automotive Finance Market report for first quarter 2015 found that subprime loans made up 16.2% of the market, while deep subprime loans captured 3.5%.
“Over the last year, there has been a tremendous amount of conversation around the growth in subprime loans, and the concern over the automotive finance industry approaching a potential ‘bubble,’” said Melinda Zabritski, senior director of automotive finance for Experian. “While it’s true that the volume of subprime loans is up, the same can be said for the rest of the risk categories. It’s important to keep in mind that, while we should continue to watch them, the percentage of subprime loans make up a small portion of the market.”
Findings from the report also showed that automotive lenders continued to grow their overall portfolios, as total outstanding balances for automotive loans reached a record-high $905 billion in the first quarter 2015, up 11.3% from a year ago.
Additionally, despite an increase in the numbers of loans put into play, both 30- and 60-day delinquencies saw slight decreases in the first-quarter report. Thirty-day delinquencies were down 4.1% from a year ago, while 60-day delinquencies dropped 3.2% over the same time period.
“The current stability in the automotive loan market is a testament to consumers making timely payments on outstanding loans, which is evident in the improvement in delinquency rates,” continued Zabritski. “While the market is in a positive position right now, dealers and lenders will want to want to keep an eye on these data sets and use them for the good of their business, as the insights enable them to make better decisions in terms of loan terms and interest rates.”
At a state level, the highest delinquency rates were found primarily in the South, while the states with the lowest rates were typically found in the Midwest and Northwest.
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