As the automobile lending market experience a great increase in the number of delinquencies on subprime auto loan, Banks are exercising more caution in their lending practices.
The latest report from the Federal Reserve Bank of New York shows that the number of debts associated with subprime car loans has fallen down to its lowest in the last two years. In the first quarter, the total subprime auto debts decreased to $25.9 billion.
The number of delinquencies in the same quarter has hit a record high in four years. Those car loan payments which are 90 days past due rose to 3.82%. The number of car owners with new having credit scores below 620 is now less than 20 percent, that is almost 10 percent lower than it was 10 years ago.
Bloomberg Intelligence Senior US Economist Yelena Shulyatyeva said that tighter credit “is a big impediment to future strength in auto sale. A lot of this demand was driven by loose lending standards.”
New auto loans are now dominated by borrowers who have good credit standing in the first quarter. This show how lenders are considering safer deals.
Rise in US Household Debt, Not to Cause Alarm
Although the total household debts rose up to $ 149,000, including that of auto loans, it should not cause alarm. The Americans’ willingness to borrow money is fueled by the increase in income, their growing confidence in their jobs and the overall economic climate of the nation.
“This record debt level is neither a reason to celebrate nor a cause for alarm,” New York Fed Research Officer Donghoon Lee said. “Borrowers look quite different today.” He is referring to the more creditworthy borrowers now compared to a decade before.