Sub­prime car delin­quency near cri­sis lev­els

The Detroit News - - Front Page -

There’s a grow­ing rift in car debt: Delin­quent sub­prime loans are near­ing cri­sis lev­els at auto fi­nance com­pa­nies, while loan per­for­mance at banks and credit unions con­tin­ues to im­prove, data from the Fed­eral Re­serve Bank of New York show.

Al­most 9.7 per­cent of sub­prime car loans made by non-bank lenders —in­clud­ing pri­vate-eq­uity-backed firms ca­ter­ing to car deal­ers — were more than 90 days past due in the third quar­ter, the high­est rate in more than seven years, ac­cord­ing to the New York Fed’s quar­terly re­port on house­hold debt and credit.

That’s more than dou­ble the 4.4 per­cent delin­quency rate for sub­prime loans made by tra­di­tional banks, a num­ber that’s been fall­ing pretty steadily since the end of the fi­nan­cial cri­sis.

There’s $1.2 tril­lion in auto loans out­stand­ing in the U.S., up $23 bil­lion from the pre­vi­ous quar­ter. About 20 per­cent of new car loan orig­i­na­tions are sub­prime, mean­ing the bor­row­ers have a credit score be­low 620, ac­cord­ing to the Fed re­port.

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