Experian: Outstanding Balances Hit $886B With Subprime Share Softening

Experian Automotive found that the total outstanding balance on open automotive loans hit an all-time high during the fourth quarter, but subprime contracts constituted a smaller part of the figure.

That all-time high figure climbed to $886 billion. But according to its latest State of the Automotive Finance Market report, Experian indicated the volume of open loans increased across all risk tiers. However, despite the increases in volume, market share for subprime and deep subprime contracts remained at what analysts described as “relatively” low levels, as much of the growth from a year ago was seen in the super-prime risk segment.

 “Whenever there is an uptick in the number of loans to subprime and deep-subprime customers, there is the potential for a ‘sky is falling’ type of reaction,” said Melinda Zabritski, Experian’s director of automotive finance.

“The reality is we are looking at a remarkably stable automotive-loan market, in part because consumers are continuing to stay on top of their payments,” Zabritski continued. “With that said, keeping an eye on consumer payment behavior and the lending community’s appetite for risk is important because these types of insights help the industry make better decisions that may affect loan terms or interest rates in the future.”

While the volume of loans in the subprime and deep subprime risk tiers were up from last year — 3.83 percent and 5.60 percent, respectively — the combined market share for the two was down slightly at 20.31 percent, according to Experian.

On the other end of the spectrum, the volume of loans to super prime consumers rose 7.90 percent from a year ago. Experian pointed out the sterling credit segment also was the only risk tier to see a year-over-year increase in market share.

Further findings from the report showed that 30- and 60-day automotive loan delinquencies remained flat during the quarter. Analysts indicated 30-day delinquencies were up just 1 basis point from a year ago, going from 2.61 percent to 2.62 percent, while 60-day delinquencies dropped slightly, going from 0.73 percent 0.72 percent over the same time period.

At a state level, the highest delinquency rates were found primarily in the South, while the states with the lowest rates were typically found in the Midwest and Northwest.