There's a growing rift in car debt: Delinquent subprime loans are nearing crisis levels at auto finance companies, while loan performance at banks and credit unions continues to improve, data from the Federal Reserve Bank of New York show.
Almost 9.7% of subprime car loans made by non-bank lenders — including private-equity-backed firms catering to car dealers — were more than 90 days past due in the third quarter, the highest rate in more than seven years, according to the New York Fed's quarterly report on household debt and credit. That's more than double the 4.4% delinquency rate for subprime loans made by traditional banks, a number that's been falling pretty steadily since the end of the financial crisis.
"The subprime delinquency rates are really where the pressure is," analysts and executives at the Fed wrote in a blog post accompanying the report. "The delinquency rate — even among borrowers in the same credit score bucket — is considerably higher and rising on the auto finance side."
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