Experian Says Auto-Loan Market Healthy as 4th-Quarter Delinquencies Rise

   By Andrew R. Johnson 
 

The frothy auto-finance market is showing small signs of stress as lenders experienced their first annual increase in 60-day delinquencies in three years, credit bureau Experian PLC (EXPGY, EXPN.LN) said Thursday.

The delinquency rate increased to 0.74% in the fourth quarter from 0.72% a year earlier. It was the first time since the fourth quarter of 2009 that 30- or 60-day delinquencies posted a year-over-year increase, according to Experian's quarterly auto report.

The auto-lending market has been one of the fastest growing segments of consumer-finance in recent years thanks to a surge in U.S. automobile sales and low interest rates. Many banks that had scaled back from making such loans during the financial crisis have returned to the business as borrowing on credit cards has remained sluggish and the mortgage sector continues to grapple with a backlog of foreclosures.

Increased competition has led some auto lenders to lower their lending criteria to approve more borrowers, according to analysts, sparking concerns that financiers could be socked with a wave of new losses if the economy turns south.

But Experian said the market remains strong, noting 60-day delinquencies remain below the 0.94% rate posted in the fourth quarter of 2009.

The 30-day delinquency rate declined in the most recent quarter, falling to 2.72% from 2.79% in the fourth quarter of 2011.

Experian's analysis "shows that the auto lending market is extremely healthy," Melinda Zabritski, director of automotive credit for Experian Automotive, said in a statement.

Capital One Financial Corp. (COF), which has increased its auto-lending activity in recent years, has seen increased competition on loan terms but isn't "too alarmed" yet, Chairman and Chief Executive Richard Fairbank said during an investor presentation last week.

"There's been a lot more rushing into the business," Mr. Fairbank said.

Write to Andrew R. Johnson at [e-mail]

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