Increase in Delinquent Car Loans
February 11, 2008
It isn’t just home mortgage payments that are being sent in late these days. An increase in late payments for car loans is also being seen. In fact, delinquent car loan payments are at their highest level in years. The bad news is many financial experts estimate that this will only get worse with time.
Many lenders have already tightened their lending standards for home loans, but many of those lenders continued to service auto loans as a means of hedging their losses. This may prove to be a costly mistake as well as more and more consumers are finding their cash flow levels decreasing.
The trend now is to tighten up on all types of consumer loans and that includes auto loans. This, of course, will have a ripple effect. With fewer people meeting the credit standards for car loans, fewer cars will be sold. Car makers as well as local dealerships will feel the most heat thought lower sales numbers.
“If fewer people can get credit, it means fewer vehicle sales,” said Mark Zandi, who is the chief economist and cofounder of Moody’s Economy.com Inc.
Vehicle loans that are 30 days or more overdue and that were made through dealers or third parties rose to 2.86 percent in the third quarter of 2007. This is up from 2.77 percent in the second quarter. Delinquencies for these types of car loans are at the highest levels in 16 years.
Late payments over 30 days on loans that were made through banks or credit unions rose to 1.81 percent in the third quarter, from 1.69% in the second quarter, according to the American Bankers Association’s Consumer Credit Delinquency report