Auto loan delinquencies and car repossessions rose in the first three months of 2013, suggesting that dealers and lenders have resumed selling cars to consumers who may be high credit risks, according to a Experian PLC (LON:EXPN) report.
A May 14 report from Experian's automotive credit unit shows that 30-day and 60-day loan delinquencies increased considerably by 1.3 percent and 12.4 percent respectively when compared with the same period in 2012.
In absolute terms, the total amount of auto loans given out in the first quarter of 2013 grew by 9.6 percent to $726 billion, compared with $663 billion in Q1 2012.
The average charge-off for bad loans rose more than $600 from $6,739 to $7,401 according to the report's findings and car repossessions surged by 16.9 percent year-on-year, going to 0.50 percent in the first quarter of 2013 from 0.43 percent in 2012.
The report also noted that while repossession rates for banks, captives and credit unions were down year-on-year by almost 15 percent, repossession rates for finance companies increased by more than 52 percent.
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"We should start to see more increases as some of the subprime loans coming onto the books begin to deteriorate," said Melinda Zabritski of Experian's automotive credit unit. "However, one thing most lenders will agree upon is that today's subprime borrower is less delinquent than those in the past."
During the recession only buyers with the best credit could get loans. Now, lenders are relaxing restrictions and sanctioning riskier loans, once again creating scenarios where default rates could rise.
However, despite the recent increase, repossession rates are still relatively low as compared to the 0.71 percent peak reached in the first quarter of 2010, according to the report.