Report: More Consumers Missing Auto Loan Payments

Could the subprime auto loan bubble be a real thing? A new report from Nasdaq indicates that more and more consumers are missing their auto loan payments. According to the report, more consumers who took out loans last year are missing payments than have been seen since the recession began. Specifically 2.6% of borrowers who took out loans during the first quarter of 2014, neglected to pay at least one of their payments by November. According to a Wall Street Journal study, that’s the highest percentage since 2008 when that number was above 3%.

Mark Zandi, Chief Economist at Moody’s, told the Wall Street Business News, “It’s clear that credit quality is eroding now, and pretty quickly.” The statistics grow worse for subprime borrowers. For those with a credit score of 620 or lower, 8.4% of them who took out a loan in Q1 of 2014 missed a payment by November. That was again the highest since 2008 when missed payment rates among that demographic rose above 9%. The overall loan delinquency rate for the third quarter of 2014 was 3.4%. That number, though higher than it was one year earlier at 3.2%, is still not as high as it was in 2009, when the number reached 4.2%.

We told you previously that the New York Times reported on an uptick in subprime auto loans. After their report, speculation has mounted that a subprime auto loan bubble may be growing and ready to burst. Like the in-depth piece by the NYT, there have been reports on both sides of the debate. It might take years of increases in subprime auto loans and delinquencies on those loans for more to be convinced that that situation is worsening. However, if the numbers don’t show a trend or go in the opposite direction, the hype of another housing crisis could dissipate. How much subprime lending do you work with at your store? Do you think that there will be a subprime auto loan bubble that will burst? Does the situation concern you?