A new report from Experian, a credit reporting company, is seeing auto-loan delinquencies of more than 60 days inching upward, according to CNBC. While the uptick is piquing the concern of some economics, the recent uptick is small when looking at the larger picture. According to Experian, 60-day-plus auto-loan delinquencies increased 0.02 percentage points—from 0.76 percent in the fourth quarter of 2017 to 0.78 percent in the fourth quarter of 2018. Any uptick in delinquencies is concerning—an indicator Americans are beginning to face financial struggles in the otherwise strong economy and labor market. However, the overall number of auto loans has ballooned since the Great Recession.
News of an uptick in 60-day-plus delinquencies comes less than a month after the Federal Reserve Bank of New York released a report showing seven million Americans are 90-days or more delinquent on their auto loans—the highest number since 2010. The uptick of these delinquencies stems from overall growth in auto loan participation with more subprime borrowers securing loans.
The overall increase in delinquencies shouldn’t be surprising. Interests rates are ticking upward as are monthly payments and the average cost of both new and used cars. In December of 2018, the average transaction price of a new car hit $37,260. That’s a $6,598 increase over December 2010 average prices for a new car, according to Edmunds, which CNBC cites in its story. This has caused the average auto loan to increase, too, to $31,722 in the fourth quarter of last year, according to Experian. The average monthly car payment for a new vehicle also hit a record high, increasing $30 from the previous year to $545. Even loans for used cars are increasing. In the fourth quarter of last year, loans for used vehicles hit $20,000 for the first time. The average monthly loan payment was $387.
While the increase in delinquencies is minor, rising new and used car prices and loans could spell trouble down the road. Many of these auto-loan delinquencies are hitting younger subprime borrowers. As history has shown time and time again, a growing economy doesn’t last forever, and at some point, there will be a contraction—minor or otherwise.