Delinquency rates in the first quarter fell despite the coronavirus pandemic ravaging the auto industry in late March, according to Experian’s quarterly report on the state of the auto finance market.
However, those numbers may not indicate the full effect of the pandemic on consumers and their ability to pay their auto loans, said Melinda Zabritski, senior director of automotive financial solutions at Experian.
In fact, the trend of dwindling delinquency rates could be attributed to other factors, including payment-assistance programs and federal stimulus checks, Zabritski said. “Some consumers are likely leveraging financial resources to manage through financial hardship, so [COVID-19’s] true impact may not be evident until the months ahead.”
Loans 30 days past due fell 5 basis points year over year to 1.93%. Likewise, accounts 60 days delinquent dropped 1 basis point to 0.68%, according to Experian. In addition, prime and super-prime consumers are continuing to choose used vehicles in a rising trend that hit record highs last quarter. In the first quarter alone, these credit segments accounted for 50.5% of all used-vehicle originations, a new record. Experian defines super-prime borrowers as having a credit score between 781 and 850 and prime as having a credit score between 661 and 780.
In the subprime market, meanwhile, used-vehicle originations hit record lows at both franchise and independent dealers, Zabritsky said. “It’s also the first Q1 where deep subprime is below 10%, at 9.76%, of used loans.”
Nationwide, used-vehicle loans in Mississippi, Indiana, Tennessee, Michigan and Minnesota all made up more than 75% of the market’s share, according to Experian.
Originally published on Auto Finance News