The performance of vehicle installment contracts improved slightly in the fourth quarter, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin released today.

As the economy improved and consumers conscientiously managed their finances, analysts found the composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 4 basis points to 1.59 percent of all accounts in the fourth quarter, a record low that’s well under the 15-year average of 2.34 percent. 

The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

The delinquency rate for direct auto loans — contracts arranged directly through a bank — fell from 0.88 percent to 0.79 percent.

Indirect auto loan delinquencies on contracts arranged through a third party such as a dealer ticked down from 1.64 percent to 1.62 percent.

“As jobs, income and household wealth improve, people have a greater capacity to meet their financial obligations,” ABA chief economist James Chessen said. “Improving consumer finances and closer attention to managing debt are the key factors behind these better numbers.” 

Bank card delinquencies saw a slight fourth quarter increase, rising 5 basis points to 2.60 percent of all accounts — but they still remain nearly 32 percent below their 15-year average rate of 3.81 percent. 

This movement comes on the heels of ABA’s recent Credit Card Market Monitor, which found that consumers are using credit cards more as a transactional tool to pay for goods and services than as a form of debt.

“The increase in credit card delinquencies was small and not unexpected given how remarkably low the rates are relative to historical standards,” Chessen said.  “The fact that consumers are paying off more of their balances even as credit card spending increases shows that people are highly conscious of their debt obligations and actively working to keep them at affordable levels.”

Chessen noted that delinquencies in all three home-related loan categories — property improvement loans, home equity loans and home equity lines of credit — fell in the fourth quarter.  This is the first time since the fourth quarter of 2012 that all three home-related loan delinquency rates dropped.

“This across-the–board decline in home-related delinquencies reflects a steadily improving housing market,” Chessen said.  “Rising home values are turning the economics back in favor of homeowners.  This trend should continue through 2014 and help push delinquencies even lower.”

Chessen is cautiously optimistic about the future, but noted that lingering headwinds may cause these historically low delinquency rates to fluctuate in the months ahead.

“While the economy continues to improve, a cautious and conservative approach to debt is critical,” Chessen said. “Some people are still struggling to meet daily expenses, and a job loss or other economic hiccup can make it difficult for them to pay their bills. Saving emergency funds and creating a financial buffer can help safeguard against unexpected bumps in the road.”

The fourth quarter 2013 composite ratio is made up of the following eight closed-end loans.  All of the following figures are seasonally adjusted based upon the number of accounts:

• Personal loan delinquencies rose from 1.51 percent to 1.70 percent.

• Direct auto loan delinquencies fell from 0.88 percent to 0.79 percent.

• Indirect auto loan delinquencies fell from 1.64 percent to 1.62 percent.

• Mobile home delinquencies rose from 3.64 percent to 3.75 percent.

• RV loan delinquencies fell from at 1.14 percent to 1.10 percent.

• Marine loan delinquencies held steady at 1.36 percent (no change).

• Property improvement loan delinquencies fell from 1.25 percent to 1.07 percent.

• Home equity loan delinquencies fell from 3.58 percent to 3.48 percent.

In addition, ABA tracks three open-end loan categories. The fourth-quarter data settled as follows:

• Bank card delinquencies rose from 2.55 percent to 2.60 percent.

• Home equity lines of credit delinquencies fell from 1.71 percent to 1.67 percent.

• Non-card revolving loan delinquencies fell from 1.84 percent to 1.80 percent.