Car Loan Delinquencies Rise, Will Interest Rates Follow?

The delinquency rate for car loans rose in the second quarter of 2009. Evidence, if you needed any, that while the recession may be easing, it’s not over yet. In the second quarter of ’09, 0.76% of all car loans were more than 60 days late, according to a report by Fitch Ratings.

Also included in the report was news that used vehicle prices during the 2^nd quarter have climbed by 9% compared to last year, mostly thanks to small trucks. Truck resale values rose 23% from the same time last year, when record high gas prices caused truck values to plummet.

When delinquency rates on car loans rise, banks are forced to raise interest rates in order to insure that their car loans are profitable. But with used car values also rising, lenders won’t be forced to adjust their car loan interest rates too much to compensate.

Banks are also under pressure from carmakers and dealerships to keep car loan interest rates low while they fight to make sales. That could keep interest rates down for a little while, but if delinquencies continue to rise, interest rates will have to follow.