Subprime auto loan borrowers are defaulting at a higher rate than during the financial crisis, according to a published report. The 60-day delinquency rate on subprime auto loans is at its highest point since 1996, according to Fitch Ratings.
More auto lenders are tightening up their underwriting criteria to only lend to individuals with better credit scores as a result of the uptick in delinquency and default rates at the lower end of the credit spectrum.
Fitch Ratings is using data from loans that are included in asset-backed securitizations, which represents just a fraction of the total auto loan market, but the 5.8% delinquency rate in March is still well above the 5% that was reported during the financial crisis a decade ago and it hasn’t been this high in nearly two decades.
Consumer finance companies have been the hardest hit because they make the most subprime loans.
“Neither banks nor credit unions have done deep subprime’ lending,” Gunnar Blix, deputy chief economist at Equifax, said in a recent phone interview. “That’s mainly done by smaller dealer-finance and independent finance companies” who rely almost solely on ABS for funding.