Car Loan Delinquencies Highest in Alaska, Arkansas, Michigan
Auto loan balances rose in every state between the first quarter of 2013 and the same quarter this year but three states had the largest increases in delinquent debt.
According to the latest TransUnion auto loan report, Alaska, Arkansas and Michigan experienced the largest year-over year increases. Delinquent auto loan debt in Alaska was 0.64% in Q1 2013 and 0.77% in Q1 2014, which was a 20.3% change. For the same period, Arkansas’ debt rate was 0.95% and 1.15%, respectively, which was a 21.1% change.
Michigan topped the list for the largest increase in delinquent auto loan debt at 0.92% in Q1 2013 and 1.12% in Q1 2014 – a 21.7% change.
On the other end of the spectrum, Oregon, Hawaii and California had the largest declines in delinquent auto loan debt, according to TransUnion.
Meanwhile, the subprime delinquency rate, described as those consumers with a VantageScore 2.0 credit score lower than 641 on a scale of 501-990, increased from 5.11% in Q1 2013 to 5.52% in Q1 2014.
The share of nonprime, higher-risk loan originations with a VantageScore 2.0 credit score lower than 700 grew by 34 basis points from 31.62% in Q4 2012 to 31.96% in Q4 2013. TransUnion said this percentage is still lower than what was observed at the beginning of the recession at 37.34% in Q4 200).
“Auto loans to the subprime population are growing as are delinquency rates for that group, but as an industry the level of risk is well managed,” said Pete Turek, vice president of automotive in TransUnion’s financial services business unit.
Auto loan debt per borrower has now increased for three consecutive years, according to TransUnion. Auto loan debt per borrower has risen nearly 13% – more than $1,900 – since this trend began in Q1 2011.
Auto loan debt per borrower jumped 4.1% from $16,191 in Q1 2013 to $16,862 in Q1 2014. On a quarterly basis, auto loan debt increased from $16,769 in Q4 2013.
While the auto loan delinquency rate, which is the ratio of borrowers 60 days or more delinquent on their auto loans, increased to 1% in Q1 2014, up from 0.95% in Q1 2013, delinquencies dropped sharply on a quarterly basis from 1.14% in Q4 2013. The delinquency rate remains below the Q1 average of 1.10% observed between 2008 and 2014.
“The continued increase in auto loan debt is a healthy sign that auto sales and the auto loan market continue to perform well,” Turek said. “It’s also encouraging to see auto loan delinquency rates remain at low levels; the 14-basis point drop this last quarter is especially encouraging.”