A busy quarter for the repo man: Auto loan delinquency rates rise

repo-man-auto-loan-delinquency-rates-riseThe ratio of U.S. auto loan borrowers who were 60 or more days past due on their payments increased in the third quarter over the second quarter from from 0.73% to 0.81%, according to Trans Union. The year-over-year delinquency rate at the national level increased by 1.25% in the third quarter.

Mississippi (1.53%) and California (1.33%) were the hardest hit. The lowest auto loan delinquency rates were found in the District of Columbia (0.26%), North Dakota (0.35%) and South Dakota (0.37%). Average auto debt nationally continued to decrease slightly in the third quarter of 2009 from $12,560 to $12,542. Likewise, the year-over-year auto debt fell by 2.5%.

Nevada is the state with the largest auto debt burden at $14,721 per borrower, followed by Texas at $14,425. The lowest average auto debt was in Nebraska at $10,770. The steepest annual increases in average auto debt as a percentage occurred in Michigan (3%), Alaska (2.17%) and Vermont (2.03%), while the District of Columbia experienced the sharpest drop in average auto debt (-3.78%) followed by Wyoming (-3.15%).

Peter Turek, automotive vice president in TransUnion's financial services group, believes the increased delinquency rate is indicative of a cyclical pattern. The good news is that seven states experienced a drop in their quarter-to-quarter delinquency rates while 22 showed a drop on a year-over-year basis. "The drop in delinquency is an indicator that some states could emerge from the recession sooner than others," Turek said in a statement released with the report.

He added, "As in recent quarters, both the availability of funding in the market, consumer demand for auto financing and tighter lending standards have contributed to a significant decrease in the number of auto loans in the market, resulting in upward pressure on delinquency rates. As well, the drop in average auto loan debt, although marginal at the national level, reflects the maturation of existing loans and the corresponding decreases in new auto loan originations in the third quarter."

TransUnion forecasts the national 60-day auto delinquency rate will rise to almost 0.9% by year's-end, which is a 7.5 percent increase over the prior year. The government's various stimulus programs seemed popular, but as the new "loans from the 'clunkers' program show up on credit files, there is a good possibility average auto debt will increase. Since lenders had tightened their lending criteria prior to the 'clunkers' program it also is expected the new loans will experience lower delinquencies," Turek said.

So essentially, the market is shifting back to a pattern dependent on local economic conditions, with some states faring better than others. At least with 22 states seeing a drop in delinquencies over last year we can see there is some economic improvement in almost half the states.

Lita Epstein has written more than 25 books, including The Complete Idiot's Guide to Improving Your Credit Score.
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