Over the past few months, delinquencies in the auto loan market have been rising. Although delinquencies have increased, however, they remain low in comparison with historic trends and should not have a negative effect on the American economy.
In new predictive data, credit-reporting agency TransUnion suggests that delinquency rates for auto loans will have risen from the current 1.36 to 1.4 percent by the end of 2017. This would be the highest level in seven years, after the industry previously rose as high as 1.59 percent. The reason behind this increase is nothing new - many lenders are making more risky subprime auto loans. Of the 74.8 million auto loans extended in the third quarter of 2016, 25.1 million were from non-prime borrowers. This is an increase of almost two million and shows that many institutions are slackening the reigns on auto finance.
TransUnion's senior director of research and consulting, Nidhi Verma, explained that auto loans commonly have a low delinquency rate due to borrowers prioritizing car repayments over other expenses. Ms. Verma suggests that rates will grow due to more subprime borrowers getting jobs and needing vehicles, but she doesn't expect any turbulence in the current market.
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