It’s becoming clear that one of the primary reasons that new car sales are booming this year is that Americans are able to more easily get credit to finance their purchases. The total amount of outstanding auto loans has increased by 10% in 2014.
According to Equifax and its National Consumer Credit Trends Report, there is $902.2 billion in outstanding auto loans, which is a new record.
“Auto lending continues to thrive, accounting for more than 50% of all new non-mortgage lending through April of 2014,” said Dennis Carlson, Deputy Chief Economist at Equifax.
“Lenders are responding to record low delinquencies by offering great rates and terms, while consumers are responding to the improving economic conditions by making the decision to purchase newer vehicles. Additionally, subprime lending has grown across all sectors in 2014. This is good news as a fully functioning second-chance market is essential for a healthy economy.”
According to the report, year-to-date new auto loans as of April 2014 reached $163.5 billion, the highest amount since 2005, and the number of them in that period was also at record levels.
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Not only has subprime lending grown this year, it’s coupled with a near-record low of loan defaults of just under 1%, the company noted.
(Click Here for details on why auto sales are so hot in 2014.)
“Subprime lending has grown across all sectors in 2014. This is good news as a fully functioning second-chance market is essential for a healthy economy,” he said.
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Subprime auto loans reached $46.2 billion year-to-date, an eight-year high, which made them about 28% of the total loan balance.
It’s not just auto loans that are booming. Banks have loosened credit for credit cards as well. They’re getting good results in that sector too as overdue accounts were at a five-year low.
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