Auto defaults rise for the first time in nearly a year
Just like when weather forecasters watch for hurricanes to make a turn toward land this time of year, finance company leaders likely have been eyeing for when defaults would make an industry-wide move higher because of the coronavirus pandemic.
According to data through July released on Tuesday by S&P Dow Jones Indices and Experian, that turn has arrived.
The auto portion of the S&P/Experian Consumer Credit Default Indices showed the metric rose 7 basis points in July on a sequential basis to land at 0.47%, representing the reading’s first uptick in nearly a year.
The reading edged up 2 basis points from August to September to land at 1.05% and has drifted lower since that point, dropping to a 10-year low in June at 0.40% as finance companies aided struggling contract holders with an array of modifications since COVID-19 arrived back in March.
Meanwhile, S&P and Experian reported that their composite rate — which represents a comprehensive measure of changes in consumer credit defaults — remained unchanged in July at 0.66%, a record low according to the firms’ data going back 10 years.
For comparison, the composite rate in July 2010 stood at 3.42%.
Also of note among the newest readings, analysts said the bank card default rate fell 37 basis points in July to 3.86%, while the first mortgage default rate ticked up 3 basis points higher to come in at 0.44%.
Turning to a review of the July data from the five largest metropolitan areas, S&P and Experian found three readings moved higher when compared to the previous month.
Miami posted the largest increase, jumping 43 basis points to 1.83%. New York rose 12 basis points higher to come in at 0.86%, while Los Angeles edged 3 basis points to land at 0.75%.
Analysts pointed out Dallas declined 5 basis points to settle at 0.61%, and Chicago dipped 2 basis points lower to close at 0.67%.
Jointly developed by S&P Indices and Experian, analysts noted the S&P/Experian Consumer Credit Default Indices are published monthly with the intent to accurately track the default experience of consumer balances in four key loan categories: auto, bankcard, first mortgage lien and second mortgage lien.
The indices are calculated based on data extracted from Experian’s consumer credit database. This database is populated with individual consumer loan and payment data submitted by lenders to Experian every month.
Experian’s base of data contributors includes leading banks and mortgage companies and covers approximately $11 trillion in outstanding loans sourced from 11,500 lenders.