Editor’s note: This article is part of a Monday special section on the latest challenges to profitability in the F&I office and potential future hurdles.
The proportion of borrowers delinquent by 60 days or longer on auto loans declined last quarter compared with the locked-down second quarter of 2020, Experian and TransUnion said.
The news comes as both companies and the American Financial Services Association estimated COVID-19 economic relief measures related to auto loans are wrapping up or have ended.
The American Recovery Association said in late August that coronavirus-related moratoriums on auto repossessions have mostly been over since late spring. TransUnion said 1.5 percent of auto accounts were classified as hardship in July, compared with 6.1 percent in July 2020.
TransUnion found 1.2 percent of auto borrowers hadn’t paid a bill in two months as of the second quarter, down from 1.5 percent in the same period in 2020. It called the rate on a par with pre-pandemic levels: Both 2019 and 2018 saw 60-day delinquency rates of 1.2 percent during their second quarters.
“The subprime risk tier has seen 5.9 percent origination growth with serious delinquency rates for this risk tier slowing (year-over-year) for the first time since the beginning of the pandemic,” TransUnion said in an Aug. 18 news release.
Experian recorded a 60-day delinquency rate of 0.41 percent in the second quarter, down slightly from the 0.44 percent observed in that period of 2020. That represented an improvement from the 0.62 percent seen before the coronavirus pandemic, in the second quarter of 2019.
The analytics firm observed that 99 percent of the auto loan accounts paid up in the first quarter remained current.
Experian did note an uptick in 30-day delinquency rates, from 1.26 percent in the second quarter of 2020 to 1.31 percent in the same period this year. The rate was 2 percent in the second quarter of 2019.
AFSA Communications Director Dan Bucherer said Aug. 18 that Americans tend to prioritize auto loans over other bills when money gets tight.
“They need to go to work,” he said.
Defaults also improved over the previous year.
The auto loan default rate stood at 0.31 percent in July, according to the S&P/Experian Consumer Default Indices. This represented a 0.01 percentage point increase from June but a decline from the 0.47 percent seen in July 2020.
Even that default rate remained below the level of recent years. From 2012 to 2020, the proportion of customers defaulting fluctuated around the 1 percent mark, based on the S&P/Experian Indices.
An uptick in repossessions might reflect a buildup of defaults moving through the system, said Melinda Zabritski, Experian’s senior director of automotive financial solutions.
Zabritski said another hypothesis holds that some lenders that hadn’t bothered to seize vehicles in the past took action now because of the rise in car values.