By Alex Veiga Associated Press
LOS ANGELES — More Americans are making their car payments on time, a trend that has sent the rate of overdue auto loans to the lowest level on records dating back more than a decade.
The rate of U.S. auto loan payments at least 60 days overdue fell in the second quarter to 0.33 percent. That’s down about 25 percent from the same period last year and 8 percent from the first three months of this year, credit reporting agency TransUnion said Tuesday.
The latest rate marks the lowest level since TransUnion began tracking auto loan data in 1999. The highest rate recorded by the company was 2.39 percent in the first quarter of 2000.
All told, the auto loan delinquency rate has fallen on an annual basis for 11 consecutive quarters. Among the factors contributing to the decline: lower interest rates that help more car buyers qualify for financing, and a strong market for used cars, which has provided more of an incentive for borrowers to avoid falling behind on payments by increasing the market value of their investment.
The trend, however, also is due to a shift in car owners’ mindset since the last recession.
That’s when many borrowers made keeping up with their car payments a priority over other types of financial obligations, including credit cards and home loans.
“You need your car to get to work, or if you have to seek employment, you need a car to get to the interviews,” said Peter Turek, a vice president of TransUnion’s financial services business unit.
While borrowers are being more diligent about their auto loan payments, they also are carrying larger balances.
The average amount of auto loan debt owed by borrowers in the second quarter rose nearly 6 percent from a year earlier to $13,427, TransUnion said.
Banks are making more auto loans and that’s helping drive up average auto debt per borrower, said Turek.
That’s because new loans tend to have higher balances early on, as it typically takes several years for borrowers to pay them down.
Many consumers moved to pay down debt and save money when the U.S. economy soured after 2007. Consumer confidence in the economy has shown some signs of improvement in recent months, and that’s made some borrowers feel more comfortable taking on debt.
Lenders are not only making more auto loans, but lending more to borrowers with less-than-perfect credit, TransUnion said.
Nearly 37 percent of new auto loans issued in the second quarter were made to nonprime borrowers, up from 33.6 percent a year earlier. Non-prime borrowers are defined as those with a score between 501 and 700 on the VantageScore credit scale, which runs between 501 and 990, with borrowers scoring at 900 or above being considered prime borrowers, or the safest credit bet.
The portion of all auto loans that went to nonprime borrowers in the second quarter was still 10.7 percent below what it was in the same period two years ago, when nonprime auto loans peaked as a share of all loans, TransUnion said.
Even so, as higher-risk borrowers make up a larger portion of those receiving new auto loans, it’s reasonable to expect that the late-payment rate on loans will also increase this year, the company said.
“But we don’t expect it to shoot through the roof,” Turek said. “We expect it to remain pretty much relatively low.”
TransUnion culled data from a random sampling of about 27 million credit reports.