Balance of US auto loans hit record high in Q4 2015

Outstanding US auto-loans balance climbed to a record $987bn in the fourth quarter of 2015, marking a 12% jump from a year earlier and the highest level since Experian began reporting the data in 2006. "While loan balances continue to rise and funding may be more easily attainable, it is critically important for consumers to stay on top of their monthly payments to keep the automotive market running on all cylinders," warns Experian's Melinda Zabritski. The report revealed the number of people who were at least 60 days behind on payments rose slightly to 0.77%.

The outstanding U.S. auto-loan balance climbed to a record $987 billion in the fourth quarter on rising vehicle sales, Experian Automotive said in part one of its quarterly State of the Automotive Finance Market report released today. Finance companies and credit unions led the increase.

The rise marks a 12 percent jump from a year earlier and the highest balance since Experian began reporting the data in 2006.

Increased auto-loan balances at finance companies and credit unions drove total balance growth in the fourth quarter, Experian said. Finance companies’ auto-loan balance surged 23 percent, and credit unions’ balance climbed 16 percent. Banks, which still held the largest share of auto loans, saw their outstanding balance grow 7.6 percent. Captives’ balance increased 6.3 percent.

Strong sales

Improved vehicle sales contributed to a strong quarter for lenders, Melinda Zabritski, Experian’s senior director of automotive finance, said in a statement. U.S. light-vehicle sales grew 8 percent in the quarter, according to the Automotive News Data Center. For all of 2015, U.S. light-vehicle sales hit a record 17.5 million units.

“While loan balances continue to rise and funding may be more easily attainable, it is critically important for consumers to stay on top of their monthly payments to keep the automotive market running on all cylinders,” Zabritski said.

Though loan balance rose, 30-day delinquencies dropped from the year-earlier level. The average 30-day delinquency rate in the fourth quarter was 2.57 percent vs. 2.62 percent a year earlier. Sixty-day delinquencies rose slightly to 0.77 percent from 0.72 percent a year earlier.

Subprime

The share of loans to subprime and deep subprime consumers inched up slightly from a year earlier, landing at 20 percent of all auto loans. With that increase, “it’s natural to see a slight uptick” in 60-day delinquency rates, Zabritski said.

“Although not yet a cause for concern,” she added, “the industry should keep an eye on this metric to see how it trends in the quarters to come.”