Thursday, March 24, 2011
Auto Loan Delinquencies Should Stabilize Sometime This Year
Feb 28th, 2011 @ 8:48 AM by Debbie Dragon
Automakers are finally getting some good news. First, auto sales are on the rise. Last month all of the major automakers posted double digit sales. Leading the way was General Motors with a 49% sales increase, followed closely by Toyota who saw a 42% increase.
The second piece of good news is that defaulting auto loans are diminishing, leaving more funds for new borrowers. In fact lenders were able to offer 28% more loans for automobiles in the last quarter of 2010 than the previous year at the same time, according to TransUnion, one of the credit reporting agencies.
“The banks and credit unions now have the money to lend,” said Peter Turek, automotive vice president for TransUnion’s financial services group, in an article for ABC news. " We’re even hearing about subprime lending going up.”
Consumers are putting more confidence into the economy and their jobs, and they are finally beginning to open up their pocketbooks to a bit more spending. This spending seems to be including new car sales.
With the increase in demand for automobiles comes the increase in demand for car loans, and as more car loans are secured, the delinquency rate tends to naturally go lower. This is because new loans can help offset delinquent loans. In the third quarter of last year delinquent car loans that were 60 days or more behind on payments, totaled just .59%. This total was down from the same quarter the previous year of .81%. Even the states hit hardest by the recession are seeing much improved delinquency numbers.
Turek estimates that delinquency rates on car loans will dip as far as .48% during the year, but could be back close to the .60% at year's end. This is because typically delinquency numbers are higher as we approach the end of the year.
In comparison to other loans, car loan delinquencies are in great shape. Credit cards and mortgage delinquency rates are still much higher. With that said however, both credit card and home loan delinquencies have also been decreasing.
TransUnion collected their data for the survey, from a pool of 27 million randomly chosen credit cases which is approximately 10% of their database.
About Debbie Dragon
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.
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