Auto loan delinquency is an important metric to look at. It means delayed payments of more than 90 days. Constantly paying loans past the due date gives you a bad rep and hurts your credit score. The lower your credit score is, the less favorable your eligible loan conditions become.
Many Americans are falling behind their monthly bills as auto loan delinquency rates rise. Around 6.3 million Americans are 90+ days delayed on their payments. The next section tackles the 2017 car loan delinquency rates in the U.S.
| State | Auto Loan Delinquency % |
|---|---|
| AK | 2.41% |
| AL | 5.75% |
| AR | 4.39% |
| AZ | 4.57% |
| CA | 3.63% |
| CO | 2.98% |
| CT | 2.62% |
| DC | 7.23% |
| DE | 4.35% |
| FL | 4.42% |
| GA | 5.52% |
| HI | 3.34% |
| IA | 2.32% |
| ID | 2.22% |
| IL | 3.82% |
| IN | 4.48% |
| KS | 3.05% |
| KY | 4.37% |
| LA | 5.86% |
| MA | 2.06% |
| MD | 4.25% |
| ME | 2.53% |
| MI | 4.69% |
| MN | 1.77% |
| MO | 4.05% |
| MS | 6.43% |
| MT | 3.09% |
| NC | 5.17% |
| ND | 2.14% |
| NE | 2.48% |
| NH | 2.33% |
| NJ | 3.09% |
| NM | 6.15% |
| NV | 4.84% |
| NY | 3.38% |
| OH | 4.06% |
| OK | 4.89% |
| OR | 2.27% |
| PA | 3.73% |
| PR | |
| RI | 2.51% |
| SC | 5.62% |
| SD | 2.78% |
| TN | 4.16% |
| TX | 4.74% |
| UT | 2.23% |
| VA | 3.19% |
| VT | 2.7% |
| WA | 2.26% |
| WI | 2.41% |
| WV | 5.06% |
| WY | 3.15% |
The table above shows the percentage of outstanding car loan balances per state that is 90+ days delinquent. The 2017 national average rate of delinquency was 4.03%, up from the previous year’s rating of 3.75%. The delinquency rates increased for almost every state, but Washington, DC had the highest rate at 7.23%. This is 79% above the national average. The state of Minnesota had the lowest delinquency rate at 1.77% which is 56% below the national average. There is a large gap between the highest and lowest rates. One conclusion made by experts based on recent data as to why delinquency rates have been increasing is this: many undeserving (in a sense, financially incapable) borrowers have been approved with loans they end up being unable to pay back properly.
How does it affect car loan rates?
Payment history is one factor considered in determining a borrower’s credit score. Late fees are charged for delayed payments and 30 days after the monthly due date you automatically get reported. When you get reported for late payments, you lose credit points. If you get too far behind on your payments, your vehicle might even get repossessed. The general trend of increasing car loan delinquency rates made sense when the economy dipped. But even with the improving unemployment rates, it seems Americans are still having a hard time making ends meet on a monthly basis. One of the reasons behind this increasing rate is many borrowers ending up with subprime loans or loans with teaser rates that end up having high interest rates, usually from 15%-20%. Those with credit scores below 600 get tied up to loans that are expensive to repay, and they end up way overextending themselves. When they start failing to make payments on time, their credit scores take a hit, perpetuating a vicious cycle that gets harder to get out of.
The good news though is that the impact of late payments don’t really stay for too long on your credit score, unless you make a habit out of it. If you are having financial struggles, don’t ignore your bills – negotiate with your lender regarding your situation and you might be offered options you didn’t think were possible. For example, you could be allowed to defer payment or even be offered refinancing at a more feasible rate. You’ll never really know for sure what else can be done unless you exhaust your options.
Source: State Level Household Debt Statistics 2003-2017, Federal Reserve Bank of New York, February, 2018
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