While at first glance these statistics might seem ominous, Experian sees no cause for concern. In fact, it believes the industry is quite healthy. According to the agency's figures, the market share for subprime buyers fell slightly in 2014 to 20.31 percent. The number of loans from so-called super-prime borrowers, those with great credit, also increased by 7.9 percent last year. Additionally, people who were delinquent on their payments only changed by hundredths of a percent.
"The reality is we are looking at a remarkably stable automotive-loan market, in part because consumers are continuing to stay on top of their payments," Melinda Zabritski, Experian's director of automotive finance, said in the company's news release.
The gradual growth in auto lending goes back a couple of years and has kept increasing since then. One cause of this is that more buyers are opting for 72-month loans, which are also pushing up transaction prices.
Analysis also shows 30- and 60-day delinquencies remain relatively flat
Schaumburg, Ill., Feb. 19, 2015 - Experian Automotive today announced that the total outstanding balance on open automotive loans continued to rise in the fourth quarter of 2014, reaching an all-time high of $886 billion. According to its latest State of the Automotive Finance Market report, the volume of open loans increased across all risk tiers. However, despite the increases in volume, market share for subprime and deep subprime loans remained at relatively low levels, as much of the growth from a year ago was seen in the super-prime risk segment.
"Whenever there is an uptick in the number of loans to subprime and deep-subprime customers, there is the potential for a 'sky is falling' type of reaction," said Melinda Zabritski, Experian's director of automotive finance. "The reality is we are looking at a remarkably stable automotive-loan market, in part because consumers are continuing to stay on top of their payments. With that said, keeping an eye on consumer payment behavior and the lending community's appetite for risk is important because these types of insights help the industry make better decisions that may affect loan terms or interest rates in the future."
While the volume of loans in the subprime and deep-subprime risk tiers were up from last year - 3.83 percent and 5.60 percent, respectively - the combined market share for the two was down slightly at 20.31 percent. On the other end of the spectrum, the volume of loans to super-prime consumers was up 7.90 percent from a year ago. It also was the only risk tier to see a year-over-year increase in market share.
Further findings from the report showed that 30- and 60-day automotive loan delinquencies remained flat during the quarter. Thirty-day delinquencies were up just 1 basis point from a year ago, going from 2.61 percent to 2.62 percent, while 60-day delinquencies dropped slightly, going from 0.73 percent 0.72 percent over the same time period.
At a state level, the highest delinquency rates were found primarily in the South, while the states with the lowest rates were typically found in the Midwest and Northwest.
Experian's quarterly State of the Automotive Finance Market report leverages information from its AutoCount® database, which enables insights into the automotive lending market by geography, credit score and vehicle registrations, among other factors. For more information on the latest State of the Automotive Finance Market report, please visit http://bit.ly/1LbNl1K.