Auto & Student

Bubbly?: Sub-Prime & Deep Sub-Prime Auto Loans Up 13.4%

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With every credit fueled asset bubble, the end stages follow the same “Originate or Decimate” model. As the pool of credit worthy buyers dries up, lending standards must be loosened in order to continue to feed the securitization machine.

Outstanding auto loan balances reached $968 billion in the third quarter, the highest ever since Experian started tracking the numbers in 2006 and up 11 percent from the third quarter of 2014. The data is from Experian’s third-quarter 2015 State of the Automotive Finance Market report show.

Auto loan balances in the second quarter of 2015 were more than 53 percent higher than the post-recession low of $631 billion in the third quarter of 2010.

Auto loan delinquency rates dropped a bit in the third quarter, showing that most borrowers are paying their auto loans, Experian said.

Thirty-day delinquency rates dropped to 2.5 percent, a 0.2 point decline from the year-earlier period. Sixty-day delinquencies also fell slightly, to 0.73 percent vs. 0.74 percent a year earlier.

Loan volume increased in each risk segment in the quarter:

• Superprime loan volume rose 8.3 percent (781-850 credit scores).

• Prime loan activity advanced 6.3 percent (661-780).

• Nonprime lending increased 7.7 percent (601-660).

• Subprime jumped 7.8 percent (501-600).

• Deep subprime climbed 5.6 percent (300-500).

 

A few more records that were also broken:

  • Average loan term for new cars is now 67 months — a record.
  • Average loan term for used cars is now 62 months — a record.
  • Loans with terms from 74 to 84 months made up 30%  of all new vehicle financing — a record.
  • Loans with terms from 74 to 84 months made up 16% of all used vehicle financing — a record.
  • The average amount financed for a new vehicle was $28,711 — a record.
  • The average payment for new vehicles was $488 — a record.
  • The percentage of all new vehicles financed accounted for by leases was 31.46% — a record.