SCHAUMBURG, Ill. — Payments flowing into all segments of auto lenders improved as 2010 came to an end. Experian Automotive's quarterly analysis of the vehicle credit industry revealed 30- and 60-day loan delinquencies exhibited sharp declines.

During the fourth quarter, Experian discovered 30-day delinquencies dropped by 9.71 percent from 3.30 percent in the last quarter of 2009 to 2.98 percent. Meanwhile, the company found 60-day delinquencies plummeted 15.26 percent, from 0.94 percent in closing quarter of 2009 to 0.79 percent.

During a Webinar sharing this data, Experian's director of automotive credit Melinda Zabritski explained why the delinquency movements are so significant.

"Especially with 30-day delinquencies, we have a very cyclical pattern," Zabritski noted, while referencing how delinquencies often climb as the year goes along. "But we saw decreases going from quarter-to-quarter in 2010. It's not overly significant, but it is a decrease regardless so we're kind of kicking that annual pattern."

Beyond the overall measurements, Zabritski shared how delinquencies dropped for the four auto loan origination segments Experian tracks.

In regard to 30-day delinquencies, Experian found a double-digit rate decline for both commercial banks (down 13.54 percent to 2.56 percent) and captive finance companies (down 12.76 percent to 3.07 percent).

The company determined credit unions watched 30-day delinquencies drop 5.41 percent in the fourth quarter to 1.72 percent. Other finance companies — what Experian classifies organizations such as Santander, Consumer Portfolio Services and others that do not hold bank deposits — had their 30-day delinquencies dip 4.78 percent in the fourth quarter to a rate of 6.14 percent.

In connection with 60-day delinquencies, Experian said banks captive finance companies and credit unions all had drops of at least 16 percent. The fourth quarter readings were as follows:

—Commercial banks: down 21.62 percent to 0.70 percent.

—Captive finance: down 23.68 percent to 0.57 percent.

—Credit unions: down 16.76 percent to 0.44 percent.

—Other finance companies: down 3.83 percent to 2.10 percent.

As those delinquency rates moved lower, Experian determined the total loan balance attached to those contracts went down during the fourth quarter, too.

The balance associated with 30-day delinquencies dropped by more than $4.4 billion or 21 percent during the fourth quarter to $16.3 billion. The 60-day delinquency balance sunk by an even higher percentage — 29.1 percent — to just above $4 billion.

"The automotive credit market showed a significant improvement year-over-year during the fourth quarter of 2010," insisted Scott Waldron, president of Experian Automotive.

"Consumers are definitely doing a better job of making their payments on time, and that bodes well for everyone in the automotive and automotive credit businesses," Waldron added.

More Franchise and Independent Dealers Working with Subprime Buyers

Moving along, the company discovered that for both used and new vehicles, the share of loans to non-prime, subprime and deep subprime customers crept up from 36.42 percent in the fourth quarter of 2009 to 38.42 percent during the closing quarter of last year.

Despite the improving figure, Experian conceded the penetration rate still trails readings during the fourth quarters of 2007 and 2008. Waldron pointed out that's when loan share for credit-challenged customers were 44.63 percent and 41.03 percent, respectively.

Nonetheless, Waldron emphasized, "We continued to see lenders loosening credit during the quarter for non-prime and subprime customers, who represent a significant portion of the automotive market."

To recap, the company defines the credit spectrum as:

Super Prime

Scorex Plus: 740 plus

VantageScore: 801-990

Prime

Scorex Plus: 680-739

Vantage Score: 701-800

Non-Prime

Scorex Plus: 620-679

VantageScore: 641-700

Subprime

Scorex Plus: 550-619

VantageScore: 601-640

Deep subprime

Scorex Plus: less than 550

VantageScore: 501-600

Used-Vehicle Financing Trends

Turning to a look deeper into used-vehicle financing, Experian examined the patterns shown by franchise dealers versus independent stores. For the most part, Zabritski indicated the trends fell into how these dealers typically operate.

As of the end of last year, Experian discovered 40.95 percent of used-vehicle buyers at franchises stores fell into non-prime segments, while 70.76 percent of non-prime buyers went to independent lots.

Zabritski pointed out both franchise and independent dealers didn't cater to quite as many deep subprime buyers in 2010 as the previous year. The deep subprime figure associated with franchise stores was off 5.1 percent; for independents it was down 4.1 percent.

But Experian learned both franchise and independent operations welcomed more non-prime and subprime buyers in 2010 as compared to the previous year. For non-prime, the gains were 8.2 percent by franchise dealers and 8.7 percent by independent lots. For subprime, the advancements were even higher — 10.7 percent for franchise stores and 13.9 percent by independent dealers.

Over on the new-vehicle side of the business, Experian revealed the share of loans to credit-challenged new-vehicle shoppers grew by 18.2 percent in the fourth quarter  compared with the closing quarter of 2009. Share of loans to non-prime customers rose from 9.75 percent in the fourth quarter of 2009 to 11.14 percent in last quarter of last year.

For subprime customers, the share of new-vehicle loans jumped from 5.6 percent to 6.96 percent, while the percentage of contracts to deep-subprime customers rose from 1.44 percent to 1.74 percent.

"The automotive lending industry continues to gather positive momentum," Zabritski stressed.

"The sharp drop in delinquencies is helping create stability in the marketplace and allowing lenders to develop a more aggressive approach," she continued. "It is still a much more conservative lending climate than we saw in 2007 and 2008, but lenders are definitely becoming less risk averse."

In other Experian findings:

—The average credit score for used-vehicle customers in the fourth quarter of 2010 was 679, down just one point from the year-ago period.

—The average loan amount for a used vehicle jumped to $16,992 in the fourth quarter from $16,281 in the year-ago quarter.

—The average credit score for a new-vehicle customer in the fourth quarter fell by eight points to 767 from 775 in the year-ago period.

—The average loan amount for a new vehicle jumped to $25,789 in the fourth quarter from $25,580 in the year-ago quarter.

Top Lenders by Market Share

Experian also revealed the top 20 lenders by market share as of the fourth quarter:

Ally: 7.01 percent

Wells Fargo: 5.84 percent

Toyota: 5.46 percent

Chase: 5.26 percent

Honda: 3.85 percent

Ford: 3.53 percent

Capital One: 2.84 percent

Bank of America: 2.28 percent

Nissan Infiniti: 1.88 percent

Fifth Third Bank: 1.59 percent

US Bank: 1.44 percent

BMW Bank: 1.42 percent

Hyundai: 1.32 percent

Santander: 1.30 percent

AmeriCredit: 1.23 percent

SunTrust: 1.09 percent

Citizens: 1.08 percent

Huntington: 1.02 percent

USAA: 0.88 percent

Volkswagen: 0.87 percent

Moving on, top used-vehicle lenders include:

Wells Fargo: 7.23 percent

Chase: 3.99 percent

Toyota: 3.40 percent

Capital One: 3.12 percent

Ally: 2.68 percent

Santander: 1.79 percent

Bank of America: 1.60 percent

Fifth Third Bank: 1.38 percent

AmeriCredit: 1.34 percent

Honda: 1.30 percent

Credit Acceptance: 1.23 percent

BMW Bank: 1.19 percent

US Bank: 1.17 percent

Carmax: 1.11 percent

Ford: 1.08 percent

USAA: 1.01 percent

Huntington: 1.00 percent

Citizens: 0.89 percent

SunTrust: 0.80 percent

BB&T Bank: 0.77 percent

Finally, top new-vehicle lenders include:

Ally: 14.49 percent

Toyota: 9.33 percent

Honda: 8.54 percent

Ford: 8.08 percent

Chase: 7.70 percent

Nissan Infiniti: 4.45 percent

Hyundai: 3.60 percent

Bank of America: 3.57 percent

Wells Fargo: 3.54 percent

Capital One: 2.42 percent

Fifth Third Bank: 2.02 percent

US Bank: 1.98 percent

BMW Bank: 1.89 percent

Volkswagen: 1.71 percent

World Omni: 1.67 percent

SunTrust: 1.65 percent

Citizens: 1.46 percent

Harris Bank: 1.09 percent

Huntington: 1.08 percent

AmeriCredit: 1.08 percent