Auto Loan Amounts Growing, But Delinquencies Down

Auto loan delinquencies are low – below pre-COVID levels, in fact – even though the size of the average auto loan has increased sharply in the past year, according to the latest State of the Automotive Finance Market report from Experian Automotive for the third quarter of 2021.

“It’s a positive sign to see delinquencies remain so stable. Consumers are demonstrating their ability to manage these larger loans and higher monthly payments,” says Melinda Zabritski, Experian’s senior director of automotive financial solutions.

With delinquencies remaining flat despite bigger loan amounts, that also makes it likely auto lenders will continue to offer easy access to financing, especially for applicants with good credit histories.

The ongoing shortage of new-vehicle inventory is driving higher average transaction prices, along with lower average incentives and the consumer shift away from sedans and into bigger and more expensive CUVs, SUVs and pickups, Experian says.

The average new-vehicle loan amount financed was $37,280 in the third quarter, a substantial increase of 8.5% vs. a year ago, or up 14.4% vs. the third quarter of 2019. The average new-vehicle monthly auto loan payment reached $609 in the third quarter vs. $565 a year ago, or $553 two years ago, the Experian report says.

The average used-vehicle loan amount financed in the third quarter was $25,909, up 8% from a year ago and up 26% compared with two years ago.

In the third quarter, auto loans that were at least 30 days past due accounted for 1.66% of the outstanding accounts, almost exactly flat vs. the third quarter of 2020, and down from 2.35% in third-quarter 2019, before the COVID-19 pandemic, Experian says. Delinquency figures are for new- and used-vehicle loans combined.

It should also be noted that the share of auto loans to borrowers with subprime credit was near a record low in the third quarter, Zabritski says in a phone interview. Shrinking share for subprime loans is a longer-term trend that predates the pandemic, she says.