Phone: 630-495-2282 Fax: 630-495-2260 Map/Directions

S&P/Experian report lower defaults on auto loans

November 2, 2018
Despite worries about auto affordability, U.S. consumers are financially in good shape on average, and one important measure — the default rate on auto loans — improved in September, according to the latest data from the S&P/Experian Consumer Credit Default Indices.
"The consumer’s financial position generally looks very good," said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. "We don’t see any huge issues coming up." The indices are jointly developed by S&P Dow Jones Indices LLC and Experian.
For auto loans, the default rate was 0.89 percent for September 2018, down from 1.05 percent a year earlier. For the purposes of the report, auto loan defaults are defined as accounts that are 90-plus days overdue.
The decline in defaults is good news for auto lenders and consumers. Analysts are keeping an eye on auto finance, to see whether consumers can continue to keep up with rising sticker prices and rising interest rates.
So far, a common strategy is for consumers to take out longer-term loans, such as 72 months or even 84 months. According to Experian Automotive, the average new-vehicle loan term was 68.8 months in the second quarter of 2018, the latest quarter for which detailed data was publicly available. That was flat compared with a year earlier.
Meanwhile, interest rates are slowly rising, which makes it harder to keep monthly payments affordable. The Federal Reserve has hiked rates six times since 2016. The latest increase was Sept. 26, increasing the federal funds rate to a range of 2 percent to 2.25 percent.
The average new-vehicle loan payment hit a record $525 in the second quarter, up 4 percent from a year earlier, Experian Automotive reported.
The S&P/Experian Consumer Credit Default Indices report also tracks other forms of consumer credit, including credit cards and mortgages.