Auto Market Revels in Record Vehicle Loan Totals: A Breakdown of the Recent National Consumer Credit Trends Report
Despite slowing progression in the auto market, the total amount of car loans and newly originated loans for purchasing vehicles are at a record high, according to the latest Equifax National Consumer Credit Trends Report released October 6, 2014.
A combination of factors supports this auto market boom: aging vehicles still in use, attractive borrowing terms and a wide selection of automobiles have compelled consumers to purchase new or second-hand vehicles. A key finding in this report reveals that the number of auto loans originated for borrowers with less than ideal credit hasn’t shifted — further proof that the “subprime lending bubble” isn’t developing.
Auto report balances
Record totals for loan balances continue to emerge in the auto market. The total balance of new auto loans is $254.2 billion, a 6.9 percent increase year over year. This figure accounts for approximately half of new non-mortgage credit and brings the total balance of outstanding auto loans to $924.2 billion in August. This is 10.8 percent higher than the figures from last year and sets a record for outstanding auto loan balances.
Auto report numbers
This past summer also saw a record total number of new loans originated. Through June, 2014, a total of 12.5 million loans were issued — a 4.9 percent year-over-year increase. This brings the total number of outstanding auto loans beyond 65 million, over 6 percent higher than the same time in 2013 and another all-time high.
Delinquencies declining, subprime borrowing stable
In addition to the record number of new loans, the 2014 report indicates that serious delinquencies are 8 percent lower than last year, now accounting for just 1.05 percent of total outstanding loan balances. As of the end of June, there were 3.9 million new loan originations for borrowers with Equifax Risk Scores at or below 640 (subprime borrowers). At 31.2 percent of all year-to-date auto loan originations, this figure is slightly lower than it was at the same time in 2013.
Auto loan originations to borrowers with subprime credit scores remain stable, providing additional evidence that a bubble is not occurring in that space.
Subprime borrowing in the auto market appears to be stable. The total balance of newly originated subprime auto loans sits at $70.7 billion — higher than it’s been in eight years, slightly higher than last year’s number, and accounting for 27.8 percent of the total balance of new auto loans. As of June, consumers with scores at or below 680 are borrowing more than other subprime borrowers, increasing their average loan amount by 3 percent over last year. The change in loan size for borrowers with scores of 760 or higher remains negligible.
Loan balances by source
The October auto report also included figures comparing auto loans issued by different sources — private banks, savings and loans or credit unions. The $453 billion in loans issued by these financial institutions is spread over 31.4 million loans, while the $471.2 billion loaned by auto finance companies is shared by 34.1 million current loans.
Overall, lending in the auto market remains strong through mid-2014 despite the declining pace of growth. Record highs were reached for both auto loan balances and the number of outstanding car loans. With loans spread across various sources and auto loan delinquencies in decline, this recent collection of data reflects positive changes in the auto market.
For information about Equifax solutions for Automotive, please visit www.equifax.com/automotive.