Sub-Prime Car Lending Problems Surface...and "Soar"

Monday, March 10, 2008 | Margy's Blog & Updates

We’ve been studying sub-prime car financing for a couple of years. This issue has been largely off the radar in the mainstream media, but we’ve noticed more attention lately, as defaults increase.

From a blog cross-posted at the Reuter’s website:

Fitch Ratings, a credit rating company, reported today that the number of auto loans at least 60 days delinquent has hit a 10-month high in January, jumping 12% from December 2007 and 44% from January 2007. Overall, 0.77% of prime and subprime auto loans in the US were delinquent in January 2008.

Subprime delinquencies (for less-credit-worthy consumers) were 4.03% in January, up 10% from December 2007 and 43% from January 2007. They are at the highest rate since late 1997.

Auto loan delinquencies are on the upswing for many reasons, but among them are the more lenient credit standards in previous years, coupled with the housing slowdown and the possibility of a recession. Hylton Heard of Fitch said other than consumers receiving their tax refunds in the coming months, there appears to be little likelihood of this trend changing in the coming months.

(My emphasis.)

The Annie E. Casey Foundation recently produced a documentary outlining the issue of car financing for low-wage workers. The video is now available online and is accompanied by a discussion guide.

You can find more information about the video, and other resources, on our new car financing page. You’ll also find selected news reports about this issue too.