Consumer Car Buying Advice Blog

Fitch Ratings reports delinquencies and losses remained at their highest levels since 2000.

It’s All About the Economy

Here at Auto Credit Express, we realize that seasonal pressures have always affected the automotive lending sector. Consumers have other things on their minds in December; buying holiday gifts, budgeting money for travel and higher food expenses  have precedence for many households, this time of year, over car payments. But the current economy has added even more pressure to this year’s holiday season.

“Auto ABS performance is being pressured by a U.S. economy in full retreat including mounting jobs losses, declines in home values and equities, and poor consumer fundamentals,” said Fitch Managing Director John Bella. “With difficult economic conditions expected to persist and continued instability in the U.S. auto industry unresolved, asset performance will continue to decline.”

Auto Delinquencies Rise

According to the Fitch report, the 60+ day auto delinquency index hit 0.75% in October, 5.6% above September. This is just below the previous high the firm measured of 0.77% set in January 2008. The Fitch-measured index of delinquencies has ranged from 0.54% to 0.77% during the entire year of 2008. The report also went on to state that subprime auto delinquencies set a record high of 4.46% in October rising 4% higher when compared to September, and 26% higher than October of 2007.

What this means for auto loans

There are currently two things at work in the auto market and they appear to be opposing each other. The Federal Reserve and the Treasury Department are attempting to loosen up the credit sector by injecting liquidity into the market while keeping interest rates low. Lenders, on the other hand, are faced with an increasing number of buyers whose credit ratings have dropped due to job losses, over-extended credit, and mortgage foreclosures.

Only time will tell how this scenario will pan out. In the interim, car shoppers with good credit may find it easier to get a car loan in the coming month. For consumers with less than stellar credit, however, the lending climate will, in the short term, continue to be much cooler than in the past.

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