Analyst Slams Brakes On Interpretation Of Recent Auto Loan Data

SCOTTSDALE, Ariz.–One analyst said it’s time to hit the brakes on some of the conclusions being drawn following the release of recent data related to auto loan delinquencies, suggesting some have been “twisting the truth” and even “lying” about the numbers.

Shevlin

Ron Shevlin

In a blog posting that was also published on Forbes.com, Ron Shevlin, managing director of fintech research with Cornerstone Advisors, said the Fed's recently released data regarding auto loan delinquencies drew headlines that car loans had hit record highs and that seven-million people are now 90+ days delinquent on their auto loan.

“This has become fodder for people who want to prove that the economy is unhealthy and that countless numbers of people are suffering,” wrote Shevlin, before adding. “The share of auto loan borrowers who were three months behind on their payments peaked at 5.3% in late 2010. The share is actually lower now—4.5%—because the total number of borrowers has risen so much in the past several years.”

2 More Misnomers

Similarly, Shevlin said a recent article that suggested many young families with children are at risk of losing their vehicles and won’t be able to take the kids to soccer practice is also based on a number of incorrect assumptions.

“Among the age groups more likely to have soccer-playing kids, delinquency rates are far lower,” wrote Shevlin. “More importantly, those delinquency rates have not appreciably increased over the past two years. And in fact, even among the 18 to 29 year-olds, the run-up in delinquency rates occurred between 2014 and 2016—and not in the past two years.”

Another misnomer, according to Shevlin: the suggestion auto finance companies are driving the high default rates.

“While it's true that 50% of auto finance companies' loans go to subprime borrowers (who have higher default rates), overall those lenders account for just 12% of all outstanding auto loan balances, and just 26% of the outstanding loans to subprime borrowers,” Shevlin said. “There's simply no way that these lenders are ‘driving high default rates’ when three-quarters of outstanding sub-prime loans were originated by other lenders.”

The “bottom line,” said Shevlin, is this: “The absolute number of delinquent auto loan borrowers is not the crisis some would make it out to be.”

For the full posting, go here.

 

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