Global information services firm Experian has published its data on auto loan delinquencies in the third quarter, finding significant increases in both 30- and 60-day defaults. Thirty-day delinquencies are up 3.7 percent over the third quarter of 2013, while 60-day delinquencies rose 8.6 percent.
Experian broke the data down by state and found that Alabama, Louisiana and Mississippi, along with Washington, D.C., rank in the top five in both categories. Conversely, the lowest default rates are found in Alaska, Oregon and the two Dakotas. Overall, delinquencies are more common in the South and less so in the Midwest and Northwest.
According to Experian's figures, the total value of outstanding auto loans in the United States is $870 billion, compared to $784 billion a year ago. More loans are being issued by finance companies, which account for $134 billion, up 19.6 percent from 2013.
"While we have observed a rise in delinquencies over the past few quarters, it was to be expected due to the growth in subprime loans," said senior director of automotive credit Melinda Zabritski. "We have to keep in mind that a majority of the market is still in the prime risk category. As long as consumers continue to do a good job of making their auto loan payments on time and lenders keep a close eye on how rates fluctuate year over year, the industry should remain relatively stable."
Indeed, 3.8 percent of all new loans were subprime. Conversely, 20.6 percent were to borrowers with sterling credit histories. Both those percentages are up slightly from last year.
Lenders can use installment loan software to set ideal terms for each borrower, allowing them to accurately assess the risk in each deal.