With candidates campaigning in Michigan all eyes are on Detroit and the U.S. auto industry. What is important for us in the asset-based business lease finance business is how Detroit’s fortunes impact credit markets and bank liquidity. While it is still a tough task for many businesses to access capital, consumers are finding access to auto loans much easier. Consumer auto financing is in effect leading the charge on increasing credit and liquidity.
Experian Automotive announced that the automotive loan market showed continued improvement, with interest rates for new and used vehicle loans reaching the lowest levels since 2008. In Q4 2011, average credit scores for new and used vehicle loans also dropped, the percentage of loans to customers with nonprime, subprime or deep subprime credit scores increased, and lenders increased their willingness to make loans between six and seven years long.
Here are some highlights for Q4 2011 in auto finance.
Consumers continued to do a better job of repaying loans in Q4 2011, as loan delinquencies fell. The 30-day delinquency rate fell 6.57 percent from Q4 2010 to Q4 2011 (2.98 percent to 2.79 percent). The 60-day delinquency rate fell 9.51 percent.
Another positive sign for the lending market is that the overall dollar volume of loans at risk dropped to $18.5 billion, a $1.862 billion drop from Q4 2010. Average interest rates for new vehicle loans fell to 4.52 percent. Average rates for used vehicle loans fell to 8.68 percent. Average credit scores for new vehicle loans dropped six points to 767. Average credit scores for used vehicle loans dropped nine points to 679. New vehicle loans to nonprime, subprime and deep subprime customers increased by 13.8 percent.
Overall, more encouraging signs that our economy is indeed on the mend.