Latest Equifax data reflects depth of subprime volume slowdown

ATLANTA - 

Updated information from Equifax showed the auto finance industry is continuing to back off originations versus the brisk pace still in place a year ago.

According to data shared this week with SubPrime Auto Finance News, Equifax reported that there have been 1.841 million retail installment contracts originated through April to consumers with a VantageScore 3.0 credit score below 620. These contracts are generally considered subprime accounts.

Analysts computed this origination volume represents a 4.5-percent decrease versus the span through April of last year. Equifax tabulated these newly issued contracts have a corresponding total balance of $32.9 billion, marking a 3.5 percent decrease year-over-year.

Through April, Equifax found that 23.1 percent of all installment contracts were issued to consumers with a subprime credit score, and they accounted for 18.3 percent of origination balances. At this juncture in 2017, the credit bureau pegged the account share at 24.3 percent and balance share at 19.5 percent.

Overall, Equifax reported that 7.96 million installment contracts, totaling $179.7 billion, were originated through April. The metrics marked 0.3-percent increase in accounts and a 2.7-percent increase in balances over this time last year.

Equifax added that installment contracts represent 85.8 percent of all auto originations and 89.4 percent of auto origination balances through the first four months of 2018.

Analysts went on to say that the average originated amount for all installment issued in April was $22,917, representing a 3.6-percent increase year-over-year. The average subprime amount was $18,411, marking a 2.3-percent increase compared to a year earlier.

Leasing figures

While not as prevalent as it is in the prime space, Equifax carved out figures connected with vehicle leasing to subprime consumers.

Analysts reported that 124,300 vehicle leases had been originated through April to consumers with a VantageScore 3.0 credit score below 620. That volume constituted a 2.1-percent decrease year-over-year.

Equifax tabulated that these newly issued leases have a corresponding total balance of $2.14 billion, a 2.3 percent decrease year-over-year.

Through April, analysts added 9.5 percent of vehicle leases were issued to consumers with a subprime credit score. During the same span in 2017, the share was 9.8 percent.

Looking at overall leasing activity, Equifax determined that more than 1.31 million vehicles leases, totaling $21.34 billion, were originated through April. These figures marked a 1.3-percent increase in accounts, but a 1.0-percent dip in balances versus the same junction a year earlier.

Analysts indicated vehicle leases accounted for 14.2 percent of all auto accounts originated through April and 10.6 percent of balances.

Equifax added that the average origination balance for all vehicle leases issued in April was $16,329; a figure that softened 3.04 percent year-over-year. The average subprime lease amount came in at $17,333; a dip of 1.19 percent from a year ago.

Analysts noted that lease origination values reflect the contract amounts only and exclude expected vehicle residual values.

Overall observations

Equifax deputy chief economist Gunnar Blix reviewed the latest figures and offered these observations.

“Consumer Credit Trends show that originations through April of this year, as reported through June, both in terms of accounts (up 0.5 percent) and balances (up 2.3 percent) are up over the same time last year,” Blix said.

“Our data indicate that a bump in lease activity as well as a continued shift toward affordable used cars may be driving the trend, and these increases are primarily being driven by customers with prime credit,” he continued.

“Auto outstanding balances in June, up 3.6 percent from the previous year, topped one and a quarter trillion,” Blix went on to say.

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