Subprime Auto Loan Delinquencies On The Rise

auto loans crash

Fitch Ratings noted subprime auto loan delinquencies of a minimum of 60 days had increased 13 percent in July. It was 17 percent higher for the same time last year. Subprime asset-backed securities yearly net losses are also increasing, which is scaring off auto loan buyers.

According to a Fitch survey, there’s also a rise in prime delinquencies, with July seeing 21 percent more prime loan delinquencies than in July 2015.

Some Wall Street investors have cautioned about the possibility of an auto loans crash. The total auto loan amount hit the $1 trillion mark with more borrowers taking on debt that increasing their length of time to pay it off.

Fitch analysts said the rising losses are the result of the weaker collateral pools from 2013 through 2015 transactions, including lower FICO scores, higher loan-to-value ratios and higher extended term loans.

There are some factors that support the auto market – used car values are exceeding expectations and will stay healthy for the remainder of the year. Plus, the U.S. unemployment rate is to relatively low around the nation.

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