Auto Loan Delinquencies Climbs North, Highest Since 2008 Financial Crisis


Since the financial crisis in 2008, auto loan debts increased to the highest level in the fourth quarter of 2016 per new reports.

According to a report from the Federal Reserve Bank of New York, most Americans are falling behind in paying off their debts.

The data further reveals that car loan delinquents of 30 days or more have increased to around $23.27 billion and were due as of Dec 31, 2016.This has been the maximum since 2008's figure of $23.46 billion per the New York Federal Reserve.

"Greater access to auto loans for non-prime consumers suggests that lenders have made deliberate decisions to accept more risk from non-prime loans in their portfolio," said Jason Laky, TransUnion's automotive and consumer lending business leader, while discussing the market forecast of the agency in 2017.

An Increase In Auto Delinquency Rate

It is true that the delinquents bring about possible losses to car makers. To attract more customers, carmakers have to provide low interest loans which conversely affect the long-term goals of the company.

With the increase in the number of delinquencies, the credit quality of loans has also deteriorated drastically. This fall in quality has subsequently resulted in several impacts, which include the increase in the duration of auto loans to 84 months at times.

Moreover, 75 percent of the auto loans originated from auto finance companies unlike credit unions and banks, which have been losing its credit standards since 2010.

Analysts from Ford Motor Co state that in the fourth quarter of 2016, approximately $142 billion was generated in car loans. This set the 2016 record of auto loan originations in the entire history of the company.

The total auto debt rose to hit $1.16 trillion with around $93 billion in 2016 alone. According to The New York Federal Reserve, the total number of car loans increased to the highest ever of 106 million in the fourth quarter. This reflected an increase of around 6 million over the year.

As mentioned by TransUnion, the auto debt has climbed up to 2.1 percent to $18,391 per borrower. The agency has predicted that the delinquency rates shall continue to increase.

Other Debts

Student loan debts too have gone up. It was reported that it rose by $31 million in the fourth quarter to a total debt of $1.31 trillion. Credit card debt too rose steeply by $32 billion and now stands at a grand total of $779 billion.

A silver lining to all this is that there was a decline of 4 percent in bankruptcy filings from Q4 2015.

Photo: Chris Potter | Flickr 

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