Auto Loan Delinquencies Surge Among Millennials

November 25, 2014 0 Comments

I really have no interest in owning or driving a car. Not because I can’t afford to have one, or because my credit is inadequate. Personally, the cost don’t outweigh the benefits. Dealing with routine maintenance and paying for gasoline on ever occasion, it is just something that is a turn off for me. I also live in a area that has access to unlimited transportation, public and private. Besides, cars are not assets, nor are they investments and I don’t invest in anything that are sure losses.

It is a shame that other people around my age group don’t see this the same way, but it is apparent that most millennials need basic crash courses in financial literacy. According to a new report by Tranunion, auto loan delinquency rates surged 13% within the last year. Young Americans (30 and under) are seeing a 17.8% surge in 60+ day delinquency rates, as auto loan debt rose for the 14th straight quarter to $17,352. Its also interesting to note that subprime loan (below adequate credit) delinquencies rose to 5.31%.

From Transunion:

Auto loan delinquency rates jumped nearly 13% in the last year to close Q3 2014 at 1.16%. At the same time, auto loan debt rose for the 14th straight quarter to $17,352. The latest TransUnion auto loan report also found that delinquency rates increased most for the youngest population subset withthose under the age of 30 seeing a nearly 18% rise.


Auto loan debt per borrower rose 3.9% from $16,694 in Q3 2013 to $17,352 in Q3 2014. On a quarterly basis, auto loan debt increased 1.4% from $17,108 in Q2 2014. Auto loan balances rose in every state between Q3 2013 and Q3 2014. Among the largest U.S. cities, Phoenix, Atlanta and Chicago saw the largest yearly auto loan debt rises of approximately 5%.

TransUnion recorded 64.2 million auto loan accounts as of Q3 2014, up from 59.4 million in Q3 2013.

The subprime delinquency rate (those consumers with a VantageScore® 3.0 credit score lower than 601) increased from 4.50% in Q3 2013 to 5.31% in Q3 2014. The share of non-prime, higher risk loan originations (with a VantageScore® 3.0 credit score lower than 661) grew by 14 basis points (from 36.39% in Q2 2013 to 36.53% in Q2 2014). This percentage is higher than what was observed five years ago near the end of the recession (31.67% in Q2 2009).

If you need a car, by all means you should probably get a car. However, there are plenty of people using cars who would be better off not having them at all. Unless, you’d like going into debt then by all means, try to obtain a car note (it could be a good way of building credit for yourself). However, I think its safe to say that unless you can afford a car, you shouldn’t be doing it just to build your credit up.

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