Low interest rates, cheap gas and strong car sales have helped push auto loan balances over $1 trillion for the first time.
The credit bureau TransUnion reports that auto loan balances increased 11 percent in the third quarter of 2015, compared to a year earlier. That represents a jump of $101 billion to $1.008 trillion.
Overall, the auto industry is poised to sell a record number of vehicles to U.S. consumers this year. New car sales are up nearly 6 percent so far this year, reports sales tracker Autodata.
“As total auto loan balance rises, we’re seeing controlled and deliberate growth by lenders,” says Jason Laky, senior vice president and automotive business leader for TransUnion. “Consumers continue to feel confident in their employment or job prospects, and their appetite for new auto loans reflects this confidence.”
TransUnion found that the average balance across all auto loan accounts was $14,515 in Q3 2015, a 2.7 percent increase year-over-year — but the slowest pace of average balance growth since Q4 2011.
The average subprime auto loan balance increased 4.2 percent from $13,328 in Q3 2014 to $13,890 in Q3 2015, the lowest growth rate since early 2012.
Auto loan balances for the subprime risk tier (those consumers with a VantageScore 3.0 credit score lower than 601) remain the smallest segment with 15.3 percent, or $154 billion, of the total balance. Consumers in the prime or better risk tiers (those with a VantageScore 3.0 credit score higher than 661) represent $670 billion of the $1 trillion in balances.
Nearly 75 million consumers have an open auto account, an increase of 5 million since Q3 2014 (69.5 million).
As balances increase, auto loan delinquencies (the rate of borrowers 60 days or more delinquent on their auto loans) continue to remain flat – remaining at 1.16% in both Q3 2014 and Q3 2015.
“More consumers have access to auto loans, yet delinquencies remain low as they continue to responsibly manage their payments,” said Laky. “Consumers are taking on more and bigger auto loans in today’s low-rate environment, but we see no cause for concern as delinquencies remain steady.”