The percentage of U.S. consumers who are late on their car loan payments has risen to its highest level in nearly eight years, according to new survey data from the American Bankers Association.
In the third quarter of last year, delinquencies in direct auto loans (those arranged directly through a bank) rose three basis points to 1.15% of all accounts. This remains well below the pre-recession average of 2.09%. Delinquencies in indirect auto loans (those arranged through a third party such as an auto dealer) rose 20 basis points to 2.43% of all accounts, above the pre-recession average of 2.03%. According to the ABA data, this represented the highest delinquency rate since the fourth quarter of 2011.
“Indirect auto loan delinquencies have steadily increased as cars have become more expensive and some consumers have taken on longer loan terms,” said James Chessen, ABA’s chief economist. “Any bump in the financial road can create problems for people who may have stretched their budget to buy a car.”
Chessen is cautiously optimistic about consumers’ ability to meet obligations in the months ahead. “The U.S. economy remains fundamentally sound,” he said. “Consumers have done a good job saving over the last few years, but it remains critically important to focus on building up a financial buffer against unexpected expenses such as auto repair or replacing a major appliance.”