Subprime car delinquency near crisis levels
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.