Despite the growing economy in the United States, an increasing number of subprime auto loan borrowers are defaulting on their loans. The information collected by Fitch Ratings reveals the delinquency level is now at 5.8 percent, which is the highest rate of delinquency in more than 20 years, Bloomberg reported.
With 60-day delinquency rates now at 5.8 percent, lenders are getting nervous about making auto loansto subprime consumers. Those with less-than-stellar credit scores and track records are having a harder time getting subprime loans from lenders because of the default rates. As a result, there are fewer subprime borrowers getting loans for new cars.
It’s an even riskier time now for lenders to take chances on subprime loans than it was during the Great Recession from 2007 to 2009. In the middle of the recession in 2008, the default rate was approximately 5 percent, which is lower than it is today.
As a result of this uncertainty, the number of subprime auto loans extended from January 2017 to January 2018 has dropped by nearly 10 percent.
The riskiest of the subprime auto loan borrowers might find more luck in going with smaller lenders that are willing to accept the risk to stay in the lending game. However, earlier this year, several smaller subprime lenders shut down – some of them because of loan losses.