Auto Loan Defaults, Other Defaults Fall Nationwide

Buyers who are worried about expensive auto loans should take some comfort from a new report out from S&P and Experian. Earlier this month, these groups released the S&P/ Experian Consumer Credit Default Indices, which basically measure levels of debt default by Americans. The report found that many kinds of defaults are happening less frequently than they were a year ago, a bright spot in a very mixed review of how the economy has rebounded from 2008.

Overall, auto loans have experienced one of the bigger decreases. From August last year, which saw auto loan defaults in the 2% range, rates for this August had fallen to about 1.3%, nearly cutting the rate of defaults in half. By contrast, S&P/ Experian focused a lot on numbers for bank card defaults, which went down from about 8% to around 5.2%. Defaults for first mortgages fell about 1.25%, from around 3.1% to near 1.9%.

The S&P/ Experian study also broke down default rates by region, measuring overall defaults for five major U.S. cities. In most of these cities, overall defaults went down in the range of 25% to 50%. In measuring defaults in New York, Chicago, Dallas, Los Angeles and Miami, researchers found that Miami had over double the rate of default of any of the other four cities. However, the year’s decline saw defaults going from around 8.3% to near 4.5%. The next highest rate of defaults was in Los Angeles, where rates of default went from around 4% to nearly 2%. Defaults in New York, Chicago and Dallas also declined substantially.

What does this mean for the American consumer? In terms of auto loans, it means less black marks on a credit report, and awkward or painful repossessions. No matter whether the lender was an established dealership with a new car financing agreement, or a smaller used car lot where repossessions often happen on a more informal basis, losing a vehicle that’s under financing is a painful experience. There is often a lot of difficulty in figuring out the final result of defaulting on the car loan. At Auto Loan Daily, we try to provide substantiated information that will help borrowers figure out what kind of car loans are in their best interest, to avoid defaults and other problems with financing. No matter how much a car is worth, whether it’s a brand-new modern ride or a quality CPO or used vehicle, the borrower can always protect themselves with low interest rate financing, a larger down payment, and an emergency fund, as well as critical comparison  shopping, to make sure that they will come out of a car deal ahead.