Outstanding auto loans ($859.6 billion) and the total number of existing loans (62.3 million) in December were the highest in more than five years, according to the latest Equifax National Consumer Credit Trends Report.
That means automobile lending “continues to thrive” in the post-Great Recession economy.
The total outstanding balance for auto loans funded by finance companies – such as Santander Consumer USA (Santander Auto Finance) – is $442.5 billion, a five-year high, while the total number of existing loans is more than 32 million, a 59-month high, the report said.
Auto loans funded by banks, savings and loans and credit unions are at $417.2 billion, while the total number of auto loans is 30.9 million – a five-year high for both numbers, Equifax said.
“Auto delinquencies have declined to levels last seen in mid-2006, and the strength in the performance of loans booked in the last few years is helping to make credit more widely available to those with higher-risk credit profiles, namely subprime borrowers,” said Equifax Chief Economist Amy Crews Cutts.
“The choices consumers are making with the types of cars they are buying have changed in the aftermath of the Great Recession, with a heavy emphasis on value for the dollar,” according to the Equifax economist. “Demand for new cars is rising, but the mix is now shifted towards economically and environmentally friendly features.”
Subprime auto lending now accounts for 31 percent of all auto loans originated, the report said.
The total balance of new credit for auto loans January-October representing 49 percent of all new non-mortgage consumer credit, according to Equifax.
Meanwhile, serious delinquencies on auto loans funded by finance companies in December represent 1.88 percent of outstanding balances, a year-over-year decrease of 13.5 percent, Equifax reported. In that same time, serious delinquencies on auto loans funded by banks or other depositories are 0.41 percent of outstanding balances, identical to December 2012.
“It’s clear as we analyze the auto finance segment that auto lenders are doing a great job in accessing risk, managing their portfolios, and making credit available to customers who need transportation to get to work or simply want to enjoy some of the great new models that manufacturers are producing,” said Lou Loquasto, Equifax Auto Finance Vertical Leader.
“The industry’s ever-growing sophistication in using credit and non-credit data to aid decision-making is one of the key reasons for the health of this segment. The biggest challenge Equifax is hearing in the market today is shrinking yields, as more lenders look to auto finance as a source of quality receivables.”
Equifax is one of the big-three credit reporting agencies, which also provides industry data and analysis.