The rate of late payments for auto loans dropped further in the second quarter of the year, helped by low interest rates and improved car sales.
That’s good news for prospective car shoppers, who should be able to find auto loans available when they go hunting for new wheels.
“What we’re seeing in the numbers is that lenders are continuing to make loans,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit. “There’s plenty of credit availability out there.”
For April through June, TransUnion found that the share of borrowers who were 60 days or more behind on their auto loans dropped to 0.44 percent, from 0.53 percent a year ago. It was the seventh-straight quarter that the delinquency rate fell, even though the average size of an auto loan rose slightly.
“The numbers indicate that consumers are handling their auto debt very well,” Turek said.
The states with the lowest late payment rate on auto loans were Idaho, at 0.19 percent, and Vermont, at 0.23 percent. The highest were Mississippi, at 0.85 percent, and Louisiana, at 0.83 percent.
One reason for the improvement is that the loans made recently are more likely to be to borrowers with stronger credit histories and a greater ability to pay. Turek noted that low interest rates and special deals on cars from companies looking to sell also make it easier for consumers to pay.
Overall, auto loans typically have a far better record for delinquency than mortgages or credit cards, because the cars can be repossessed more quickly than a home, and credit card balances must go to a collection agency.
The average amount of auto debt rose a fraction to $12,689 in the quarter, from $12,643 the prior year. Borrowers in Washington, D.C., carry the highest debt per borrower, at $15,128, while those in Nebraska carry the lowest, at $11,106.
The credit reporting agency used a sample of personal credit information from its database of 27 million consumer records to determine the delinquency rate. It measures auto loan delinquency at 60 days, because that’s how long lenders will generally wait before beginning repossession procedures.
TransUnion expects the auto loan delinquency rate to fall further through the end of the year, based on economic factors like the unemployment rate and interest rates. However, Turek said the rate could switch direction rapidly if the economy dips back into recession.
Earlier this month, TransUnion found that late payments on credit cards hit a 17-year low in the second quarter, to 0.66 percent. Mortgage delinquencies also fell, for the sixth-straight quarter, to 5.82 percent.