Auto loans flowing at an 8-year high
Rising demand for cars and light trucks and lenders seeking borrowers are fueling this rebound.
In another sign of a strengthening economy from the automotive and construction sectors, credit reporting agency Equifax (EFX) says $69.6 billion in new credit for auto loans originated in January and February. That's the highest level in more than eight years. It's also more than 70% higher than the recession low point of $40.2 billion during the same months in 2009.
According to Equifax, the new loans funded by banks, savings and loans or credit unions during the first two months of the year grew by more than 20%.
"Sales of new cars and light trucks hit a 5-year high in the first quarter on a seasonally adjusted basis, and consumers' demand for auto loans is similarly strong," Equifax chief economist Amy Crews Cutts said in a press release.
Cutts noted that light trucks are particularly in high demand "for the newly energized housing construction trade." Consumers are also funding purchases of used cars with these loans, which Equifax says are at "attractive" rates.
Cutts says the banks and credit unions aren't necessarily being more loose with their money. But those institutions are "more aggressively seeking lending, and for the most part only for those with super-squeaky-clean credit," she told Automotive News.
Also on the plus side, serious delinquencies on auto loans from banks and other financial institutions fell to 0.32% of outstanding balances last month. That's down nearly 14% from March and more than 9% lower than in April of 2012. Serious delinquencies on auto loans funded by finance companies fell to under 2% of outstanding balances, down nearly 12% from March and 15.4% lower than April of last year.
As of last month, according to Equifax, the total outstanding balances on loans funded by auto finance companies stood at almost $417 billion, a 50-month high, while the total number of outstanding loans was more than 31 million, its highest level in 46 months.
"As painful as it's been, the economy is getting better slowly," Cutts told Automotive News. "There may be people out there who could afford to pay cash, but you can get 1.8% or 1.9% financing if you're in the prime bucket. It's awfully hard to turn that down. Auto lending is doing quite well now, simply because they're making it easy."
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