LOS ANGELES (AP) – Banks are increasingly extending auto-loan financing to borrowers with less-than-sterling credit, a trend that’s contributing to a higher rate of missed loan payments.
The rate of U.S. auto-loan payments late by 60 days or more rose to 0.88 percent in the first three months of the year, credit reporting agency TransUnion said Tuesday.
That’s up from 0.82 percent in the first quarter last year, but down from 1 percent in the last three months of 2012, the firm said.
Among subprime borrowers, or those whom lenders deem a higher credit risk because of their track record of managing debt, the delinquency rate jumped to 5.5 percent in the first quarter from 5.09 percent a year earlier.
Steady job gains, low interest rates and improving consumer confidence have helped spur U.S. sales of cars and trucks. Many Americans are moving to replace older vehicles after holding back on purchases for several years following the last recession. Vehicle sales climbed 8 percent in May to 1.4 million.
Lenders have responded, making loans available to more borrowers, even those with less-than-perfect credit.
“Lenders have determined that their portfolios can handle additional risk at this point in the business cycle,” said Peter Turek, automotive vice president at TransUnion.
As lenders continue to increase financing to high-risk borrowers, there’s a greater chance those borrowers could fall behind on payments, Turek added.
Subprime borrowers accounted for 15 percent of all U.S. auto loans in the first quarter, unchanged from a year earlier. That share of all auto loans remains smaller than it was in the first three months of 2009, when subprime loans made up 20.3 percent of all auto loans, according to TransUnion.
All told, auto loan volume grew 6.1 percent in the first quarter versus the same period last year.
As lending has picked up, so have average balances on auto loans.
One reason for that is that banks are making more auto loans, which tend to have higher balances early on, as it typically takes several years for borrowers to pay them down.
For the January-March period, the average balance of a U.S. auto loan was $13,260, up 4 percent from $12,755 in the same period last year, the firm said.
Among subprime borrowers, the average auto loan balance grew 6.6 percent to $12,006 in the first quarter.
(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)
- 6 tips to create the best family movie night
- New bone marrow procedure holds promise for healing pain
- The best places to celebrate Fall in Phoenix
- Infamous athletes who did the most time for their crimes
- Diet, exercise and aspirin: 3 tools to fight colon cancer
- 2016 baseball highlights, bloopers and blunders
- See how CFOs really feel about business in the Valley
- The best television shows on the internet
- A preseason guide to avoid holiday weight gain
- The 5 worst things you could do for your roof
- 6 coolest things brewing in Arizona
- The virus that keeps head and neck cancers on the rise
- State Fair ‘Kid Reporter’ has all the angles covered
- 4 important things to know about timeshare maintenance fees
- Signs of delayed car crash injuries
- The truth about sports concussions
- The Alzheimer's epidemic: Facts you need to know
- The season is here, keep your Fantasy Football team strong all season
- 8 TV shows you can't miss this fall
- Football is here: 6 tips to make this your best season ever
- Gameday recipes and beers to match
- 6 reasons the Cardinals are driven to win the Super Bowl
- The Pac-12 football season nears kickoff
- Tips to get ready for a pain-free golf season
- Protect your family with these 7 home security features
- How to train like an Olympic swimmer
- 2016 Olympics: A guide to must-see TV events
- The bride's guide to feeling your best on your wedding day
- Deciding when you need knee surgery
- Celebrating Fourth of July is much cooler in these AZ towns