Stat of the Week: A Historic High for Auto Loans—and for Serious Delinquencies

Auto lenders, I’ve got some good news and some bad news for you.

Let’s start with the good:

The auto finance industry is the most active it’s been in years. More than 89 million people currently have some form of auto financing. The industry generated approximately $584 billion in new auto loans and leases last year—$15 billion more than in 2017. In total, we’re talking about $1.27 trillion in outstanding debt—the highest of any period on record.

The bad?

At the end of 2018, about 7 million of those borrowers were in “serious delinquency”—they had loans that were more than 90 days past due.

What does this mean for the overall health of the industry?

Here’s what a group of economic analysts working with the New York Fed recently wrote about the statistics on the Liberty Street Economics blog:

“The surging auto loan industry has been on our radar for more than five years now. But, the level of loan originations has been commensurate with auto sales, with a steady 50 to 60 percent financing share of combined new and used vehicle purchases—a percentage surprisingly stable in our sample period, which suggests that car loans have been tracking the growth seen in motor vehicle sales. Although rising overall delinquency rates remain below 2010 peak levels, there were over 7 million Americans with auto loans that were 90 or more days delinquent at the end of 2018. That is more than a million more troubled borrowers than there had been at the end of 2010 when the overall delinquency rates were at their worst since auto loans are now more prevalent. The substantial and growing number of distressed borrowers suggests that not all Americans have benefitted from the strong labor market and warrants continued monitoring and analysis of this sector.”