While year-to-date auto loan growth rates have slowed compared to last year, totals for new credit and the number of new loans originated for auto purchases are at record highest, according to the latest Equifax National Consumer Credit Trends Report.
The total number of new loans originated through June reached 12.5 million, an increase of 4.9% from same time a year earlier. The total balance of new loans was $254.2 billion, an increase of 6.9% from the year-ago period and representing nearly half of total new non-mortgage credit originated.
"Auto sales continue to soar, crossing the 17.4 million mark on an annualized basis for new cars and light trucks in August," said Amy Crews Cutts, senior vice president and chief economist at Equifax. "The abundance of high-quality vehicles for sale, the attractive financing options available, and the ever-increasing age of cars on the road today have created an environment that makes it easy for consumers to say 'yes' when it comes to purchasing a new or used car. Importantly, auto loan originations to borrowers with subprime credit scores remain stable, providing additional evidence that a bubble is not occurring in that space."
Other highlights from the most recent Equifax data include:
The total balance of auto loans outstanding in August is $924.2 billion, an all-time high and an increase of 10.8% from same time a year ago;
The total number of auto loans outstanding stands at more than 65 million, a record high and an increase of more than 6% from the same time last year;
Serious delinquencies represent 1.05% of total balances outstanding, a decrease of 8% from same time a year ago;
The total number of new loans originated year-to-date through June for subprime borrowers, defined as consumers with Equifax Risk Scores of 640 or lower, is 3.9 million, representing 31.2% of all auto loans originated this year. This is a slight decrease in share from this same time in 2013;
Similarly, the total balance of newly originated subprime auto loans is $70.7 billion, an eight-year high and representing 27.8% of the total balance of new auto loans, a slight increase in share from the previous year;
Year-to-date in June, the average loan amount for borrowers with risk scores of 680 or lower are increasing the most, showing a 3% increase from the previous year. Loan sizes among borrowers with risk scores of 760 or higher show little change from the same time a year ago;
By source, balances on outstanding loans funded by banks, savings and loans and credit unions are at $453 billion, while the total number of loans is more than 31.4 million;
Similarly, total outstanding balances for loans funded by auto finance companies is $471.2 billion, while the total number of existing loans is 34.1 million.
Crews Cutts is scheduled as one of the keynote speakers for the 22nd Annual Financial Services Collections & Operational Risk Conference this month in Las Vegas.
Equifax in August released a report taking a deeper look at the highly publicized notion that subprime auto lending is creating the next bubble. By examining data aggregated from the credit reports of more than 210 million consumers in the Equifax credit database, the study evaluated whether certain traditional characteristics of a bubble are evident. The report is available here.