Troubles With Delinquent US Auto Loans

October 20, 2008

According to recent reports, the number of auto loan delinquencies is on the increase. With more Americans facing serious financial setbacks due to the downturn of the national economy, keeping up on car and truck loans has become difficult if not impossible for some.

The report, submitted by Experian Automotive, states that there are now almost $25 million in past due auto loans in the US. This amount includes figures for the second quarter of 2008; A 9% increase in loans 30 days past due and 11% for loans 60 days past due.

When compared to the out of control circumstances of the American mortgage crisis, caused chiefly by the years of giving loans to high-risk borrowers, the auto loan delinquency rate is still at manageable levels. In fact, only about 4% of the 30-day or 60-day loans are currently past due.

This does not mean that there are not adverse effects. Lenders are waiting longer for repayment and are finding new ways to recoup their monetary investment.

Further information from reports state that a nearly 5% drop over two years has occurred involving loans offered by auto finance companies directly affiliated with auto makers. This equals about 31% of the total loans opened. Direct auto finance companies account for the largest percentage of auto loans, followed by other financers, banks, and credit unions.

Direct or captive auto lenders are the hardest hit from the leasing market collapse and lower overall auto sales. This is because of their emphasis on larger loan amounts and new vehicle loans. Auto sales may actually reach the slowest rate in a decade and half, particularly with SUVs and pickups, which have dropped off due to financial issues and volatile fuel prices.

The troubles continue to ripple through the auto markets. It remains to be seen how high the auto loan delinquency rates will rise before they can be stabilized.