Delinquencies in the auto loan market are ticking up to their highest level in several years, forcing lenders to tighten terms in some cases and raise interest rates, according to the Wall Street Journal. About 4.5 percent of auto loans made in 2006 to top-rated borrowers were at least 30 days delinquent as of the end of September, up from 2.9 percent the previous month, according to a Lehman Brothers survey of companies servicing these loans.
That is the biggest one-month jump in at least eight years. Lehman also said that 12 percent of subprime borrowers were delinquent on their 2006 auto loans as of September. That is the highest level since 2002 and up from 11.1 percent the previous month.
About $575 billion in loans for new and used cars are made annually, according to the National Automotive Finance Association. "Auto loan defaults tend to be event-driven, like a job loss or an unexpected health-care bill or a divorce," says Dan Berce, CEO of AmeriCredit Corp., one of the country’s largest subprime auto lenders.
In the second quarter, borrowers were at least 30 days behind on 2.77 percent of all auto loans made by nonbank lenders, according to the American Bankers Association. That was the highest delinquency rate since 1991.