Auto loans delinquencies are higher now than during the Great Recession, the New York Fed reported. They are highest among subprime buyers. But franchised dealers are less likely to sell to subprime buyers unless they are a specific focus of the dealer’s business. The New York Fed report figures do not separate new from used vehicle buyers.
Auto loans nationwide increased by $9 billion in the fourth quarter of 2018, the New York Fed said. But most of the increase was from consumers with high credit, after years of growth across all credit levels. At the same time, the number of subprime borrowers rose greatly, and with it, the risk of delinquency.
New York Fed economists said the increase in delinquency among subprime borrowers “suggests that not all Americans have benefitted from the strong labor market.” Borrowers younger than 30 also showed sharply higher rates of delinquency than others.
Those trends among subprime and younger borrowers could start to affect franchised dealers in their used-car department, which several economists have said could become an increasingly important profit center.
For more details on the New York Fed report, click here.Download Bulletin PDF