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Delinquent Car Loans Reach All-Time Highs

Record-setting fourth quarter followed record-setting third quarter.

by on Feb.17, 2017

New car sales set a new record this year. Car loan delinquencies also hit a record high in 2016.

The rate and amount of delinquent auto loans has climbed to its highest level since the end of 2008 when the U.S. was teetering on the edge of tbe Great Recession.

Car loans delinquent by 30 days or more grew to $23.27 billion, the most since $23.46 billion in the third quarter of 2008. They were up from $22.98 billion in the prior quarter. Roughly 3.8% of the loans were delinquent at the end of the fourth quarter, which is up from 3.6% at the end of the third quarter, according to data on consumer debt collected by the Federal Reserve Bank of New York.

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Seriously delinquent auto loans whose payments were 90 days or more past due jumped to $8.24 billion in the fourth quarter, which was just an extension of the third quarter of last year, when the previous high was set, according to the survey. (more…)

Auto Loans Stretch into Dangerous Territory

“A formula for disaster”?

by on Jul.13, 2016

More shoppers are turning to 73-84 month loans to stretch their new car budget.

Though U.S. auto sales have slowed a bit in recent months, the American market seems all but certain to set a new record again this year, the third consecutive all-time high.

So why does that worry many industry experts? Because a growing number of car buyers are stretching their budgets with some of the longest loan terms ever offered, something one senior industry executive calls “a formula for disaster.”

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A new study by TransUnion shows that the average auto loan is now on the books for 67 months, up from just 62 months at the beginning of the decade. And the report reveals that the number of loans running anywhere from 73 to 84 months has more than doubled since 2010.

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American Car Buyers Paying Record Prices, Going Deeper Into Debt

Leasing soars as motorists look to hold costs down, says new study.

by on Mar.03, 2016

American motorists are paying more for their vehicles and borrowing more.

Even as U.S. car sales surge to record levels, a new study shows that American motorists are spending more than ever for their vehicles – with loan levels also reaching new records.

Searching for a way to offset rising prices, a growing number of buyers are turning to leasing, according to Experian Automotive which issued its quarterly “State of Automotive Financing” report on Thursday.

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“People shop for vehicles largely based on monthly price, and right now, average dollar amounts for new vehicle loans are soaring,” said Experian’s auto credit director Melinda Zabritski.

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More U.S. Auto Buyers Falling Behind on Payments

But that’s “not yet a cause for concern.”

by on Feb.09, 2016

Car dealers have been seeing record numbers of shoppers - but loan delinquencies are rising, too.

More expensive loans aren’t the only reason for automakers to worry, industry analysts are warning. There are signs that more consumers are having trouble handling the loans they’ve already taken out.

With a record number of Americans buying new vehicles last year, lenders logged a record amount of debt on their books. And a growing number of those buyers are falling behind on payments, according to Experian Automotive. While 30-day delinquencies are actually down, the number of motorists two months behind on payments grew sharply.

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“Given that we’ve seen an increase in loans to subprime and deep-subprime consumers, it’s natural to see a slight uptick,” explained Melinda Zabritski, senior director of automotive finance for Experian. “Although not yet a cause for concern, the industry should keep an eye on this metric to see how it trends in the quarters to come.”

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Lenders Continue Easing Access to Auto Loans

Banks, finance companies taking on more risk.

by on Mar.09, 2015

Bank regulators and analysts are wondering if it's too easy to get a loan for a car.

The rising volume of new car loans is drawing the attention of bank regulators and analysts, who are watching for signals about what the increasing demand for loans says about the state of the economy and the car business.

Researchers from the Federal Reserve Bank of Cleveland noted that newly originated auto loans hit $105 billion in the third quarter of 2014, which is the highest level since 2005.

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Federal Reserve Bank of Cleveland researchers Emre Ergungor and Caitlin Treanor claim the rapid growth in auto loans is due to an increase in the demand for cars and a continuing easing of standards in the supply of credit. (more…)

Dealers Reject Fed Plan Single Interest Rate for Car Buyers

NADA’s McConnell says idea will raise costs to consumers.

by on Oct.08, 2014

NADA Chairman Forrest McConnell claims a plan to charge car buyers the same interest rate will raise prices.

A proposal to mandate a single interest rate auto lenders can charge car buyers to ensure minorities weren’t discriminated against would only cause all buyers to pay more for a car, according to the National Automobile Dealers Association.

In a speech at an Automotive Press Association luncheon in Detroit, Forrest McConnell, president of McConnell Honda Acura in Montgomery, Alabama, and chairman of NADA, said the recommendation by the Consumer Financial Protection Bureau (CFPB) to require auto dealers to use a standard interest rate for all financed purchases denies buyers “their right” to a discounted interest rate.

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“The government is trying to take away a customer’s right to get a discount,” he said. “The Consumer Financial Protection Bureau, CFPB, is working on statistical anomalies.” (more…)

Is it Better to Buy or Lease? Or is There Another Option?

Loans, leases – and lease assumptions – give shoppers options.

by on Aug.08, 2014

Car shoppers have a variety of options when it comes time to close a deal.

New car sales are stronger than they have been since the start of the Great Recession, and likely to keep climbing, according to industry analysts. Demand is expected to be especially strong in the coming weeks, with August traditionally one of the hottest months of the year at dealer showrooms.

The good news for consumers is that despite surging demand, interest rates remain at near-recession lows. That’s led many buyers to move up-market by stretching out loans to five, six and even seven years. But if you’re in the market for a new car, truck or crossover, should you be buying or leasing? Are there, in fact, other even more affordable options?

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A new study underscores the financial advantages of leasing over buying, but it also points to a potential alternative, a small but growing number of motorists opting to take over existing leases, something equivalent to buying a “nearly new” vehicle.

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Auto Sales Jumping as Banks Loosen Credit Reins

Despite rise in subprime lending, defaults at near-record lows.

by on Jul.31, 2014

Banks have loosened the credit lines and as a result auto sales are booming in 2014.

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.

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“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. (more…)

Auto Buyers Loading Up on Loans as Monthly Payments Hit Record

Buyers also extending loans to record levels.

by on Jun.02, 2014

While sales continue to rebound, consumers are borrowing more to get into a new vehicle.

U.S. auto buyers are paying more than ever and stretching out their loans to record lengths in order to make their monthly payments, according to a new study.

Consumers are also turning to leases in record levels to help cut their costs, reveals the latest State of the Automotive Finance Market, from the data tracking firm Experian Automotive.

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“Consumers are really relying on financing as the price of new vehicles continues to move higher,” said Melinda Zabritski, Experian’s senior director of automotive credit. “As the cost of purchasing a new vehicle continues to rise, consumers clearly are stretching the loan term to help lower monthly payments, keeping them at a manageable level.”

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Subprime Auto Lenders Rein Back

Shift could slow automotive recovery.

by on Apr.21, 2014

Sub-prime lenders aren't expected to leave the market, says Moody's, just pull back slightly. Image courtesy: EZAutoFinance.org.

U.S. auto sales got off to a slow start this year, and though they showed a modest rebound in March, industry analysts are questioning whether 2014 will continue to see the sort of recovery forecast for the American car market this year – especially if lenders begin reining in financing.

And that’s a possibility suggested by a new study by financial tracking firm Moody’s showing that U.S. subprime auto lenders are “exercising more caution,” especially when it comes to higher-risk customers.

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But the study does not seem to indicates a wholesale slowdown, Moody’s concluded. It points to slower growth in non-prime lending by banks and credit unions, as well as so-called “captive finance” firms operated for or by the various automakers.

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