A recent tweet by "CarDealershipGuy" grabbed a lot of attention.
About 1.84% of auto loans are now "severely delinquent," he said, citing Cox Automotive data. That's the highest rate since February 2009 — a time when the global automotive industry spiraled as a result of the Great Recession.
Here's the thing: That's not as bad as it sounds, a Cox Automotive spokesman explained to Benzinga.
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"In 2009, unemployment was high and when there's high unemployment, delinquencies often turn into defaults which become repossessions," Cox Automotive's Mark Schirmer says.
Today, he adds, "the job picture is so much stronger."
Still, defaults are on the rise, too.
Here's A Breakdown Of The Data
- Auto loan performance in December saw further deterioration as "delinquent by more than 60 days" increased by 5.3% and was up 26.7% from a year ago.
- Of all loans, 1.84% were severely delinquent — an increase from 1.74% in November and the highest rate since February 2009.
- Compared to a year ago, the severe delinquency rate was 39 basis points higher.
- In December, 7.11% of subprime loans were "severely delinquent" — up from 6.75% the prior month.
- The subprime severe delinquency rate was 163 basis points higher than a year ago, and the December rate was the highest in the data series back to 2006.
- Loan defaults declined 13.5% from November but were up 16.9% from a year ago. The annualized auto loan default rate in December was 2.56% — lower than the 2.98% rate in December 2019.
- The default rate in 2022 was 2.28%, up from a low of 1.98% last year but still lower than the 2.90% rate in 2019.
While Cox Automotive expected auto loan defaults to continue to increase, "we are coming off of super-low auto default rates in 2020 and 2021 and beginning of 2022," Schirmer adds.
Tickers To Watch
Delinquencies for Ally Financial Inc (NYSE:ALLY) gradually increased throughout 2022. In the fourth quarter, 30-day delinquency rates rose to 3.56%. That's up from 2.93% in the third quarter; 2.52% in the second quarter; and 2% in the first quarter of 2022.
Observers of this trend would be wise to tune in on Jan. 31 when Credit Acceptance Corp. (NASDAQ:CACC), a financing program company that enables automobile dealers to sell vehicles to consumers regardless of their credit history, releases fourth-quarter earnings.
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