More Americans fell behind on their auto loan payments in the last three months of 2012, a time of the year when some borrowers' financial obligations temporarily take a backseat to spending on holiday shopping.
Beyond the seasonal increase, the late-payment rate on auto loans declined on an annual basis and remained near the lowest point in more than a decade, credit reporting agency TransUnion said Tuesday.
The trend comes amid a strong market for cars and trucks. Many Americans are moving to replace older vehicles after holding back on purchases for several years following the last recession.
U.S. auto sales grew 13.4 percent last year to 14.5 million and are projected to climb up to 15.5 million this year.
The combination of strong auto sales and low interest rates has fueled a rise auto financing. As more borrowers have taken on auto loans, the ratio of those who have failed to make timely payments has diminished.
In addition, most borrowers continue to make paying their auto loans a priority, a trend that grew more pronounced in the aftermath of the housing collapse and recession.
"Consumers are valuing their auto-related loans a little more ahead of other things when they do get a little bit stretched in their budgets," said Peter Turek, automotive vice president in TransUnion's financial services business unit.
The rate of auto loans with payments late by 60 days or more was 0.41 percent in the last three months of 2012. That's up from 0.38 percent in the previous quarter, but down from 0.46 percent a year earlier, TransUnion said.
Turek noted that the company always sees a slight uptick in the auto loan delinquency rate during the fourth quarter. The financial pressures of holiday shopping can lead some borrowers to delay or skip a loan payment — a dynamic that also leads to higher late-payment rates for credit cards and home loans.
Even so, the fourth quarter's late-payment rate remained near the lowest rate on TransUnion's records going back to 1999. That record-low rate, 0.33 percent, was recorded in the second quarter of last year.
The national late-payment rate on auto loans peaked in the first three months of 2000 at 2.39 percent, the firm said.
All told, the auto-loan delinquency rate has fallen on an annual basis for 13 consecutive quarters.
The trend has held up even as Americans have been taking on higher levels of auto-loan debt.
In the fourth quarter, bank auto debt per borrower increased for the seventh consecutive quarter, rising 5.4 percent to $13,747 from $13,045 a year earlier, TransUnion said.
One reason for that is that banks are making more auto loans, which tend to have higher balances early on, as it typically takes several years for borrowers to pay them down.
TransUnion's analysis of data on new auto loans lags by a quarter, so the most recent figures are for the third quarter. In that period, new auto loans and leases grew nearly 16 percent from the same quarter in 2011.
The rise in auto sales also has spurred banks to step up lending to borrowers with less-than-stellar credit.
Some 32.4 percent of new auto loans issued in the July-September period were made to nonprime borrowers, up from 30.6 percent a year earlier. Non-prime borrowers are defined as those with a score between 501 and 700 on the VantageScore credit scale, which runs between 501 and 990, with borrowers scoring at 900 or above being considered prime borrowers, or the safest credit bet.
The average balance of new auto loans also increased on an annual basis in the third quarter, rising about 1.7 percent to $18,326, the firm said.
"We've been observing an increase in sub-prime borrowers in the auto loan space now for several quarters and we do expect this will eventually push the overall delinquency numbers higher," Turek said.
Given the rise in auto loans going to higher-risk borrowers, Turek said he expects that the trend will eventually drive the overall late-payment rate for auto loans higher. But he anticipates that the delinquency rate will remain about the same in 2013's first quarter, possibly even dropping slightly.
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