The percentage of subprime auto loans saw a huge decline in the third quarter despite growing concerns that auto dealers and banks are writing too many loans to borrowers with checkered credit histories, according to new data.
Actually, Experian says the percentage of loans written for those with subprime and deep subprime credit ratings fell to its lowest point since 2012.
“The marketplace turning more prime is an encouraging trend. It indicates that industry pros are employing data and analytics as part of the lending process, and consumers are taking a more active role in controlling their credit before investing in a car,” said Melinda Zabritski, Experian’s senior director of motor vehicle finance.
Total, 25.67 percent of the auto loans written in the third quarter were for borrowers with subprime or deep subprime credit ratings. By comparison, just over 62 percent of the loans written previous quarter were for borrowers with prime and super prime fico scores, according to Experian.
The drop in subprime loans comes after months of warnings from critics that banks, auto finance companies and credit unions have issued too many loans to buyers who’ll be unable to repay them.
In the third quarter, there was a slight reduction in the percentage of loans thirty days overdue and slight increase in the ones that were 60 days delinquent.
Still, significantly less than 1 percent of most loans were two months overdue, a level below historical averages.
On the other hand, Experian says the common term for a fresh vehicle auto loan hit an all-time most of 69 months, thanks a lot partly to a slight increase in the percentage of loans timetable to be repaid over 85 to 94 months.
“We’re beginning to see some spillover to loans much longer than 85 months,” said Zabritski.
Overall, the average payment for a fresh vehicle in the third quarter was $30,329, a rise of $291 from the third quarter of this past year.