By Eileen AJ Connelly
AP Personal Finance Writer
NEW YORK (AP) — Late payments on auto loans dropped sharply in the first three months of the year compared with the same period in 2009, reflecting both tighter lending standards and consumers’ improved payment habits.
The delinquency rate for payments that were 60 days or more overdue fell to 0.66 percent in the quarter, from 0.83 percent in 2009’s first quarter, according to credit reporting agency TransUnion.
The lower delinquency rate echoes results for credit cards and mortgages in the period, showing that as the economy shows signs of recovery, consumers are getting a better handle on paying their debts.
What’s more, while 2009 was the worst year for U.S. auto sales in almost three decades, sales started to recover toward the end of the year. Ford Motor Co., for instance, posted a 33-percent increase in sales for December versus the prior year, while Toyota sales increased 32 percent. That means first quarter car payment results include more new loans.
One of the keys to the lower delinquency rate is that lenders are being more careful about who can obtain a loan, said Peter Turek, automotive vice president in TransUnion’s financial services group. He said the more stringent standards will continue, even as consumers get back on their feet and demand for new loans increases.
TransUnion expects the delinquency rate to continue falling in the current quarter. That depends in part on improvements in the unemployment rate.
“We still need to see the labor market continue to improve,” Turek said. Auto payment rates are more closely aligned with employment rate changes than credit cards and mortgages, he noted.
On a state-by-state basis, the states with the highest 60-day delinquency rates were Louisiana, at 1.2 percent, Alabama, at 1.13 percent, and Mississippi, at 1.11 percent. They were the only three states with rates above 1 percent, compared with 11 states in the 2009 first quarter. Overall, the rate dropped in 46 states.
The agency tracks payments that are two months past due because that’s as late as most lenders will allow borrowers to get before they start the repossession process.
Average auto debt nationally fell slightly, to $12,501 from $12,596 a year ago.
