Car loan, lease value up in third quarter despite falling sales
The value of auto finance arrangements in the United States, including new and used vehicle loans and leases, was $ 198.8 billion for the third quarter, a substantial increase of 18.2% compared to a year ago, and the second highest quarterly total on record.
That’s according to the New York Federal Reserve’s third quarter 2021 household debt and credit report, released on November 9. The record is $ 201.9 billion, for the second quarter of 2021, according to the report.
“This really reflects that auto prices are quite high right now … rather than an increase in the number of loans issued,” New York Fed researchers said on a conference call. In keeping with Federal Reserve policy, the researchers asked not to be named.
Researchers say they can’t share third-quarter finance contract volume figures, but volume is inevitably down from a year ago, even though the dollar amount is up.
Separately, Driving intelligence reports that new vehicle sales fell 13.4% for the third quarter, to about 3.4 million cars and trucks combined. This is due to an industry-wide shortage of new vehicles due to a shortage of computer chips. Used vehicle prices are also on the rise, analysts said.
In addition, the New York Fed reports that the share of subprime loan origination and lease arrangements increased slightly for the quarter, to 17%, from 16.8% a year ago. That’s below an 18.9% subprime share of creations in the third quarter of 2019. The New York Fed defines subprime as credit scores below 620.
Auto lenders likely tightened approval standards for borrowers with subprime loans early in the pandemic, New York Fed researchers say. Since then, the results suggest that lenders have eased somewhat, but at 712 for the third quarter, the average credit score for originators is still high by historical standards, the researchers report.
Meanwhile, severe defaults, defined as 90 days or more late, were below pre-pandemic levels in the third quarter of 2021, at 4.05% of overdue balances, up from 4.82% a year earlier, or 4.71% in the third quarter of 2019, the report said.
The researchers for the New York Fed report are Andrew Haughwout, Donghoon Lee, Daniel Mangrum, Joelle Scally, and Wilbert van der Klaauw.