More people were late with their auto loan payments in the third quarter as job losses continued, but amid rising delinquencies there are positive signs for the economy in certain states.
The auto delinquency rate -- the rate at which payments fell behind 60 days or more -- edged up in the July-to-September quarter to 0.81 percent, from 0.80 in the same period last year, according to credit reporting agency TransUnion.
The increase from the second quarter to the third quarter of this year was far greater, reflecting both the weak economy and seasonal trends, said Peter Turek, automotive vice president in TransUnion's financial services group.
It's common for late payments to rise as the year progresses. Borrowers tend to fall behind as they focus on other spending, often getting back on track in the first and second quarters, when they can use income tax returns to bring their payments current.
Car loan payments that are 60 days or more late are considered a precursor to default because of the difficulty consumers face in getting caught up. TransUnion culls its data from approximately 27 million individual credit files in its database.
While average delinquency rates rose nationwide in the third quarter, the rate fell in Washington D.C. and six states: Colorado, Louisiana, Maryland, North Dakota, South Dakota and Vermont.
The Dakotas nearly always have among the lowest delinquency rates for all types of loans, but improvement in a state like Louisiana can be seen as a positive sign, Turek said. Year-over-year, Louisiana's auto delinquency rate fell more than 14 percent.
"That was very good news for that part of the country," he said, suggesting it indicates the state is beginning to show signs of recovering from the economic damage of Hurricane Katrina.
It's too early to tell for certain, but the numbers indicate that some pockets of the country are starting to emerge from the recession earlier than other regions, Turek said.
The small increase in auto delinquencies compared with 2008 also reflects the fact that loans are harder to get, because banks and finance companies have raised their lending standards, and consumers are looking for fewer loans as they tighten their belts.
Those factors led to a drop in average auto debt in the third quarter. Nationally, the amount outstanding on the average car loan dipped 2.5 percent to $12,542, from $12,861 last year.
Loans taken out as part of this summer's Cash for Clunkers program had not started to appear on most credit reports when the quarter ended. As those new loans show up on credit files, there is a good possibility average auto debt will increase. But since lenders offered loans only to stronger applicants, those loans are less likely to end up delinquent, Turek said.
The auto loan figures follow results that showed mortgage delinquencies hit a new high in the third quarter, but the rate of increase from the second quarter slowed. Meanwhile, credit card delinquencies dipped in the third quarter from the second, where a seasonal increase was expected.
TransUnion forecasts the fourth-quarter auto delinquency rate will rise to almost 0.9 percent. Fourth-quarter rates are typically higher, as consumers divert money to holiday spending. The weak labor market will also continue to weigh on consumers, Turek said.