The latest TransUnion Industry Insights Report puts the national delinquency rate for credit cards at its lowest level in 7 years, falling from 1.27% in the second quarter of 2013 to 1.16% in the second quarter of this year.
Auto loans, however, are a different story. Car loan delinquency rates jumped more than 9% in the second quarter of this year over the same period in 2013. At the same time, auto loan debt rose for the 13th straight quarter.
That last point should come as no surprise since car sales set new records month after month. These buyers aren't paying with cash.
Good news/bad news
When it comes to consumer debt, there does appear to be a good news/bad news breakdown.
"Consumers continue to have a good handle on their credit cards, with delinquencies at all-time lows across the spectrum," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. "We observed that delinquency rates are dropping for all age groups, and at relatively similar rates."
The news isn't quite as good when you look at credit card balances. While all age groups are doing better paying their bills on time, the two oldest age groups – 50 to 59 and 60 and older – are adding to their credit card balances. That's a time in life that consumers should be reducing their debt, not adding to it.
Overall, average credit card debt per borrower remained almost unchanged in the last year, increasing slightly from $5,226 in 2013 to $5,234 in 2014. On a quarterly basis, credit card debt was up only slightly in the second quarter from the first.
Consumers who borrowed money to buy cars are having a more difficult time keeping up with their payments.
Auto loan delinquency – which is defined as being 60 days or more late on a car payment – increased to 0.95% in the second quarter of 2014, up from 0.87% in the same period of 2013. Quarter to quarter, however, delinquencies were down slightly.
Since 2007, the auto loan delinquency rate has risen as high as 1.59% in the fourth quarter of 2008. Its low was 0.86%, in 2012.
While some might see the rising delinquency rate as cause for concern, given that new car sales have become one of the economy's strongest drivers, TransUnion believes the numbers are not unexpected.
Still relatively low
"Auto lending remains similar to what we have observed during the last several quarters," said Peter Turek, automotive vice president for TransUnion. "Delinquency rates remain relatively low while auto loan balances keep rising -- both metrics aided by increasing auto loan originations.”
TransUnion says there are 4 million additional auto loans than there were a year ago. If the delinquency rate is ticking higher, that suggests a larger portion of these loans are going to consumers who are having a harder time keeping up.
In an August report, the Federal Reserve Bank of New York noted that auto loan balances are rapidly rising and that much of the boom in sales can be traced to subprime borrowers. Is it a problem? The Fed appears to be on the fence.
While the greatest growth in car loans has been among what the Fed calls “riskier groups,” the bank says it still makes up a smaller percentage than before the 2008 financial crisis.