Getting car loan with bad credit easier
LOS ANGELES — 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 sales of cars and trucks. Many Americans are moving to replace older vehicles after holding back on purchases for several years during the 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 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 an 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.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Tesla home battery at $7K, partnered with rooftop solar system, may help reduce power bills
- Consistency keeps Cellone’s Bakery customers coming back
- With higher student debt than ever, millennials rely on support from parents
- EPA to release biofuels proposal by June 1
- Charter Communications makes offer for Time Warner Cable
- Cuba’s dairy industry, once touted as a success, is struggling
- Home sales slipped in April on tight supply, high prices
- AT&T evolves beyond phones