With wholesale used-vehicle prices still strong, observers recently asked Experian Automotive’s director of automotive credit why repossession volumes are softening, not strengthening.
After pausing for a moment during a recent Webinar, Melinda Zabritski acknowledged lofty wholesale prices “certainly could cause lenders to repo vehicles earlier but you’re certainly going to be subject to lending policies and practices.
“I think one of the reasons why we are seeing some of those lower repossession is just purely the credit lifecycle of those loans,” Zabritski continued.
During the third quarter of this year, Experian found 30-day delinquencies fell 7.05 percent, ticking down from 2.99 percent in the third quarter of last year to 2.78 percent.
Meanwhile, analysts determined the third quarter’s 60-day delinquencies fell 7.4 percent year-over-year from 0.77 percent to 0.71 percent.
Experian added the total volume of dollars at risk also fell by $2.99 billion year-over-year.
Zabritski indicated all these factors combined to result in repossession rates dropping by 6.4 percent from 0.67 percent to 0.62 percent.
“You might recall a couple of quarters ago, two years ago, we saw the really higher repossession rates,” she recollected. “As we look at where the most significant number of delinquencies tend to occur are in that two to three years into the loan. You get the early defaults come off very quickly.
“But I think we’re just seeing more of a cyclical pattern,” Zabritski went on to say. “I would anticipate that with that increase in subprime lending that we’ll start to have some increases in repossessions, probably in a couple in a couple of quarters.”
Zabritski went on to point out that low charge-off amounts certainly have caused some lenders to send out some repossession assignments a little earlier. Experian discovered the third-quarter’s average charge-off amount settled at $6,820, which was $820 less than a year earlier.
So what might happen in regard to repo volume during the coming quarters?
“You’ve had such prime paper coming on the books that we have not seen that balance tip the scales. Quite honestly, the subprime loans just haven’t started to go bad yet,” Zabritski concluded.