Auto Loan Delinquencies Rise
Auto loans have now evolved from being one of the least risky consumer credit products to one of the loan types most prone to delinquencies, according to a report from VantageScore. An increased number of consumers are struggling with monthly auto loan payments, which have risen due to rising car prices, higher financing costs and increased interest rates. These factors are compounded by rapidly escalating auto insurance and repair costs, reducing consumer visibility into monthly payments and exacerbating delinquencies. Further complicating delinquency patterns, a historically high number of consumers owe more on their car loans than their car’s market value.
“Auto loans have not followed the trends of other credit products as delinquencies have been persistently trending up across all credit tiers and income groups over the past 15 years,” said Dr. Rikard Bandebo, Chief Strategy Officer and Chief Economist at VantageScore. “Even after the industry tightened lending criteria three years ago, delinquencies have continued to rise.”
VantageScore’s research found that the increase in delinquencies is not attributable to any specific group of consumers, as delinquencies were higher across credit risk tiers and income groups. While many lenders adjusted their criteria in response to growing losses in 2022 and 2023, delinquencies have continued to rise rather than decline.