According to a new report coming from Experian Automotive, car loans have gathered pace, as buyers swarm to use the financial aid to purchase new cars, with the tally of outstanding auto loan balances jumping 12% during the last quarter alone.
The research shows that while the practice has contributed to the high numbers tallied each month by the automakers, setting a sales pace only seen before the great recession, the fact that lenders lower credit requirements and buyers opt for riskier loans over bigger periods is a dangerous move.
“The rosy glow of perfect payment performance in the automotive space is beginning to tarnish,” says Melinda Zabritski, Experian senior director of automotive finance. “We’re starting to see a slight uptick in the number of consumers struggling to make their automotive payments on time; however, we have to keep in mind that these percentages are still extremely low.”
During the second quarter sales through auto loans increased by 12% to $839 billion, while now the average term for the financing deal rose to 66 months. For purchasers of shady credit history, the average contract is even longer, at 71 months. Also, the measurement known as the delinquency rate – actually the number of buyers who are 60 days or more late on their payments – has skyrocketed by 70% from the same period last year to 0.62%.