2018 second quarter showed signs of improvement for auto loan delinquencies.
30-day delinquencies dropped to 2.11% of outstanding balances from 2.2% in the prior-year period, while the 60-day delinquency rate dropped to 0.64% of outstanding balances from 0.67% over the same time period. However, the industry saw average finance amounts and monthly payments reach new highs during the period.
Delinquencies are one of the most telling metrics. The downward trend is an encouraging sign. However, lenders will keep a close eye on car buyers’ payment performance.
The average new-vehicle finance amount jumped more than $700 from the prior-year period to $30,958 and used-vehicles average jumped $520 from the prior-year period to $19,708. Also, the average monthly payment for a new-vehicle purchase increased $20 over the same period to a record $525 and the average payment for used increased by $13 to a record $378. 72 months remains the most common loan term for both new and used financing,
Outstanding loan balances have increased from $1.027 trillion in the prior-year period to a record $1.149 trillion, consumers appear unfazed by the rise in loan amounts and monthly payments. However, the average interest rate for new and used increased 56 and 38 basis points to 5.76% and 9.40%, respectively.
Car buyers are increasingly looking to credit unions to secure auto financing; the segment saw double-digit growth in new-vehicle financing (12.9%) and strong growth overall (4.9%). Credit unions closed the quarter with a 21.3% share of the market in the second quarter. The only other lender type to experience growth was the captive finance segment, which grew 1.2 percent during the same time period.
Market share for banks dropped to 31.6% from 32.3% in the second quarter of 2017.
High-risk tiers felt the impact of more restrictive credit standards, with the percentage of both subprime and deep subprime falling below 19% of loan balances. On its own, deep subprime hit an all-time low of 3.54%, compared with 3.98% in the prior-year quarter. The pullback from the high-risk tiers caused average credit scores for new and used financing to rise from 714 and 652 in the year-ago period to 715 and 655, respectively.