ATLANTA (1/6/12)--Auto finance lenders have increased lending by 47% the past two years, and outpaced credit union and bank lending to subprime borrowers, according to the latest Equifax National Credit Trends Report.
The auto finance companies originated 854,800 loans in July 2011, compared with 581,300 originated two years earlier. Credit unions and banks originated 820,000 loans in July 2011, a decrease of less than 2% from the 832,000 they originated in July 2009.
Auto loans to subprime borrowers, defined as those with an Equifax credit score below 640, now account for 38.5% of all auto loan originations at the companies, compared with 17.6% for banks and credit unions. Equifax said the numbers are approaching pre-recession levels.
Delinquency rates also improved--to 1.63% for 60+-day delinquencies on auto loans, compared to a 3% peak earlier, reflecting a sustained credit retraction that the auto lending industry experienced earlier than other loans, said Michael Koukounas, senior vice president of special client services for Equifax in a press release.
"With unemployment rates remaining elevated for a prolonged period, auto lenders have proactively adopted more comprehensive data and verification tools for greater loan-level transparency in evaluating a winder band of consumers, which has helped enable the auto lending industry to recover more quickly than others," Koukounas added.
In July, roughly 1.7 million auto loans--worth a combined $32 billion--were originated. From January to July of last year, 11.3 million new auto loans were originated, a 13.2% increase over January to July 2010 totals. The accounted for $213.9 billion, a 14.8% increase in amounts loaned over the period.
Average monthly payments for auto finance companies were $407 in July 2011, up from $404 the previous year. For credit unions and banks, the average monthly payments were $364 for July 2011, compared with $377 the previous year.