May 07, 2012
ATLANTA — With auto loans leading the charge, Equifax contends the credit landscape is continuing its consistent recovery heading into the second quarter.
Analysts discovered auto loan and lease balances rose to a post-recession high of $727.5 billion in March, according to Equifax’s March National Consumer Credit Trends Report.
Equifax tabulated auto finance loans totaled more than $380 billion — the highest since the third quarter of 2009.
Meanwhile, the firm said delinquency rates among all vehicle contracts are at their lowest point in five years.
Based on the assessment that, “auto sales are rising fast and new auto loans to pay for them are also growing,” Equifax determined new auto loans obtained from banks in January rose to 728,000 accounts, up from 630,000 a year ago, while new auto loans from finance companies grew to 753,000 accounts from last January’s 735,500.
After tallying up auto activity, analysts found that at the end of the first quarter U.S. consumer debt stood at $10.9 trillion, down more than 11 percent from its peak of $12.4 trillion in October 2008.
Analysts noted credit write-offs are lower by 50 percent from March 2009 when banks wrote off a total of $39.7 billion — excluding home finance write-offs. The past March, the number stood at $20 billion, reflecting stronger consumer finances.
During the recession, Equifax said the average size of delinquencies rapidly increased as dollar rates were outpacing total number of delinquent accounts, a trend that has since reversed in auto, bankcard, consumer finance and retail card categories.
Analysts acknowledged more than 72 percent of total delinquencies are still tied to loans originated between 2005 and 2007, which comprise 36 percent of balances outstanding. They pointed out loans opened in 2009 and later have performed much better as only 12.6 percent of delinquent accounts are from credit lines or loans opened in or after 2009.
Equifax went on to highlight new non-mortgage credit balances continue to increase.
New auto, bank and retail cards, consumer finance, home equity and student loan credit rose to $61 billion in January, according to the report. The figure represented an 11-percent increase above the same time a year ago when new accounts totaled $55 billion.
After carving out the auto sector data, Equifax mentioned its latest information in other segments, which included:
Bankcard and Consumer Finance
—Outstanding bankcard balances in March stood at $532.8 billion, an $8 billion decrease from the previous year; however this is a modest drop compared to the decrease of more than $54 billion seen from 2010-2011.
—In March, delinquencies and write-offs among existing bankcards were well below pre-recession levels and the lowest in five years.
—Available credit, the difference between credit limits and balances, is climbing and in March 2010 reached nearly $1.9 trillion, the highest since Sept. 2009.
—New consumer finance loan volume totaled 1.4 million new accounts in January, an increase of 8 percent above the same month a year ago.
—Consumer finance loans taken out in January summed to $4.3 billion, a 12.1-percent increase above January 2011 volumes.
Student Loans
—While still elevated from previous years, write-offs decreased from March 2011-2012, the first reverse in the trend in six years.
—The average amount per new loan is currently $4,548, down nearly 20 percent from Jan. 2011 ($5,572) the first decline in three years.
—Similarly, loan amount per student dropped 12 percent to $6,917 versus the same time last year.
—Borrowers aged 30-39 year old took out 17 percent of the number of new student loans in January, equating to nearly 15 million loans, however their loans represent 24 percent of the total dollar amount of new student loans opened in January (approximately $157 billion).
—Conversely, the 23-and-under age range took out nearly twice as many loans (just over 30 million), yet account for nearly the same total dollar amount.
Reviewing the entire credit landscape, Equifax chief economist Amy Crews Cutts said, “Lower delinquency rates and fewer write-offs coupled with the growth of new credit across multiple sectors clearly outlines the increased activity of consumers and their renewed faith in the marketplace heading into the second quarter.
“Aside from home finance, which will require a longer recovery time due to long foreclosure process, the data reflects the improving U.S. economy as consumers explore new financial options and exercise due diligence in repaying their existing debts,” Crews Cutts added.