ARLINGTON, Va.—A new analysis offers deeper insights into what the increase in auto loan delinquencies means.
As CUToday.info reported here, Americans have been borrowing more to finance automobiles and less to finance home purchases, according to a report from the Federal Reserve Bank of New York. The data show auto loan delinquencies have been steadily rising since 2014. More than 8% of borrowers with credit scores below 620 become delinquent during Q4.
NAFCU Regulatory Compliance Counsel David Park noted the Fed Bank’s Research and Statistics Group data reveal "there were over seven-million Americans with auto loans that were 90 days or more delinquent at the end of 2018."
Park said the post also showed that auto loans originated by credit unions outperformed those originated by auto finance companies: "6.5% of auto finance loans are 90+ days past due, compared with only 0.7% of loans originated by credit unions."
"Because of the credit risk that arises whenever a credit union makes loans, the rise of indirect auto lending, and the performance of auto loans trending downward, it seemed like a good idea to revisit some of the NCUA's guidance relating to indirect auto lending and delinquency rates," Park explains.
Park recommends credit unions whose indirect auto lending programs are seeing similar downward performance trends as flagged in the New York Fed report review the NCUA resources for guidance about best practices to manage those programs.