Auto-loan delinquency rates

[rickaren]

Auto-loan delinquency rates to soar

Posted Tuesday, Mar 17, 2009, 1:29 pm in Chrysler Employee News

The nation’s recession is taking a bite out of new vehicle sales and it’s squeezing a record number of customers struggling to pay their auto loans.

By the end of this year, the 60-day delinquency rate for automotive loans is expected to reach its highest point in nearly two decades, according to TransUnion, one of the nation’s largest credit-rating agencies.

During the fourth quarter of 2008, the auto-loan delinquency rate—the ratio of auto loan borrowers 60 or more days past due to those who are not—increased to 0.86 percent. TransUnion said it expects that rate to increase to 1.13 percent by the fourth quarter of 2009.

Previously, the highest national delinquency rate on record by TransUnion, which has been tracking the data since 1992, was 1.01 percent, a record hit during the fourth quarter of 2001. “This year … is a high-water mark” for delinquencies, Peter Turek, vice president of the automotive division for Chicago-based TransUnion, said.

During the short 2001 recession, delinquency rates increased about 10 percent. For the current recession, which began in December 2007, automotive delinquency rates have already increased 25 percent.

Turek cited several reasons for the more-severe increase, including: the collapse of the housing market, higher unemployment and a generally weaker economy, marked by lower consumer spending.

TransUnion is one of the three largest companies that track and develop consumer credit scores. The company’s auto-loan delinquency rates are based on 27 million anonymous consumer records that are randomly sampled.

On a state-by-state basis, Mississippi had the highest auto-loan delinquency rate during the fourth quarter, at 1.62 percent. Alaska, meanwhile, was the lowest, at 0.19 percent.

While Michigan’s unemployment rate is the worst in the nation, the state’s auto-loan delinquency rate is better than most. The state ranks 36th, with a delinquency rate of 0.68 percent.

As for future auto loans, Turek said he doubts that banks will ease up on their lending criteria anytime soon.

These days, Turek said, banks that are providing auto loans prefer customers with credit scores of about 680—up from about 620 in the recent past—and he doesn’t see that ending anytime soon.

[rickaren]

March 17, 2009

Chrysler CEO wants $1.5 billion more for auto loans



Chrysler Chief Executive Bob Nardelli today called for a second round of funding for the company’s financial arm that would enable sales to customers who otherwise can’t qualify for loans.

In an interview with CNBC, Nardelli also said he wants “some kind of decision” from the president’s task force on the auto industry by March 31 on Chrysler’s request for an additional $5 billion to fund operations.

Chrysler is already operating on $4 billion in federal loans. But in the interview, Nardelli emphasized the effectiveness of a separate $1.5 billion loan the U.S. Treasury Department made in January to Chrysler Financial. Chrysler used that loan to subsidize 0% loans on new vehicles.

“We’ve gone to Treasury and said we need to re-up that amount,” Nardelli said.

Due to the credit crunch, many banks and other lenders have tightened their credit standards, making it difficult for many consumers to buy without larger down payments.

“I’m not suggesting we go back to where we were in this country,” Nardelli said, referring to the easy credit in housing and auto markets. “But the pendulum has swing dramatically the other way. Our consumers could not get financing. They have had to put from 5% to 15% cash down.”

Through February, Chrysler’s U.S. sales were down 49% compared to the same period a year ago.

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