The latest Equifax National Consumer Credit Trends Report indicates that the automobile lending sector continues to thrive. The total number of new auto loans originated from January through October 2013 was 20.2 million, totaling $405.2 billion and representing the highest origination total for that time in eight years.
"Auto delinquencies have declined to levels last seen in mid-2006, and the strength in the performance of loans booked in the last few years is helping to make credit more widely available to those with higher-risk credit profiles, namely subprime borrowers," said Equifax Chief Economist Amy Crews Cutts. "The choices consumers are making with the types of cars they are buying have changed in the aftermath of the Great Recession, with a heavy emphasis on value for the dollar. Demand for new cars is rising, but the mix is now shifted towards economically and environmentally friendly features."
Other metrics for new credit include:
Year-over-year, the total balance of new loans January-October 2013 increased 14.7%, while the total number of new loans increased 11.6%; Subprime auto lending now accounts for 31 percent of all auto loans originated today; October 2013 auto loan amount totals also hit an eight year high for the month at $39 billion; and The total balance of new credit for auto loans January-October 2013 represents 49% of all new non-mortgage consumer credit.
"It's clear as we analyze the auto finance segment that auto lenders are doing a great job in accessing risk, managing their portfolios, and making credit available to customers who need transportation to get to work or simply want to enjoy some of the great new models that manufacturers are producing," said Lou Loquasto, Equifax Auto Finance Vertical Leader. "The industry's ever-growing sophistication in using credit and non-credit data to aid decision-making is one of the key reasons for the health of this segment. The biggest challenge that Equifax is hearing in the market today is shrinking yields, as more lenders look to auto finance as a source of quality receivables."
Other highlights from the most recent Equifax data include:
Balances on outstanding auto loans ($859.6 billion) and the total number of existing loans (62.3 million) in December 2013 are the highest in more than five years. By source, loans funded by banks, savings and loans and credit unions are at $417.2 billion, while the total number of loans is 30.9 million - a five year high for both.
Similarly, the total outstanding balance for loans funded by auto finance companies is $442.5 billion, a five-year high, while the total number of existing loans is more than 32 million, a 59-month high. Serious delinquencies on auto loans funded by finance companies in December 2013 represent 1.88% of outstanding balances, a year-over-year decrease of 13.5%.
In that same time, serious delinquencies on auto loans funded by banks or other depositories are 0.41% of outstanding balances, identical to December 2012.