Two Ways for Auto Loans

One area of the credit arena that continues to grow is vehicle lending. Auto loans have grown for 26 straight quarters, a New York Federal Reserve report out Tuesday showed, even though delinquency rates are also up.

Banks and traditional lenders have been largely limiting their borrowing to higher-rated customers, even as the U.S. job picture remains upbeat. But their nonbank competition—mostly the financial arms of the auto manufacturers themselves or lenders that operate from a “captive” position as part of the dealerships—have taken a different tack.

Almost 10 percent of subprime car loans made by nonbank lenders were more than 90 days past due in the third quarter, the highest rate in more than seven years, according to the New York Fed’s quarterly report. That’s more than double the 4.4 percent delinquency rate for subprime loans made by traditional banks, a number that’s largely improved since the end of the financial crisis.