Auto-loan delinquencies are on the rise as cash-strapped Americans increasingly struggle to repay car and truck loans, according to a study out Monday, the latest sign that the nation's economic woes are bleeding into the automotive-finance business.
Nearly $25 billion in auto loans are past due, according to a report by Experian Automotive being released at the Automotive Finance Summit in Las Vegas.
Auto lenders saw a 9% increase in loans 30 days past due in the second quarter of 2008 from a year earlier, and an 11% increase in loans 60 days past due.
In a sign that more trouble lies ahead, the creditworthiness of people holding outstanding loans is worsening. About 57% of borrowers with open loans have what is considered a prime credit rating, down from 61% two years ago.
The breadth of auto-loan delinquencies isn't nearly as severe as the rippling problems caused by the nation's mortgage meltdown, created by years of extending home loans to high-risk borrowers. The overall delinquency rate on auto loans remains manageable, with less than 4% of 30-day or 60-day loans past due.
But the effect is felt nonetheless by lenders who must wait longer to get loans repaid and go to greater lengths to recoup their money.
"There is a pretty big dollar burden that is out there in terms of delinquencies," said Melinda Zabritski, Experian director of automotive credit. "We expect to see this pattern hold strong."
In all, about 64 million auto loans worth $795 billion were outstanding in this year's second quarter, according to Experian. The overall number of loans originated in the second quarter this year was 4.4 million, compared with 5.1 million a year earlier.
The share of loans extended by captive auto-finance companies, those affiliated with an auto maker, has dropped nearly five percentage points in two years to 31% of all loans opened. These companies still account for the largest share of auto loans, followed by banks, credit unions and financing companies.
Write to Sharon Terlep at sharon.terlep@dowjones.com
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