Late car payments declining; lowest default rate in more than 10 years

CLEVELAND - Most U.S. consumers are cautious about spending too much money, and they’re also careful about paying their bills on time. It’s part of the big shift in behavior in the past four years due to the recession.

That's when many borrowers made keeping up with their car payments a priority over other types of financial obligations, including credit cards and home loans.

"You need your car to get to work, or if you have to seek employment, you need a car to get to the interviews," said Peter Turek, a vice president of TransUnion's financial services business unit.

Many consumers moved to pay down debt and save money when the U.S. economy soured after 2007. Consumer confidence in the economy has shown some signs of improvement in recent months, and that's made some borrowers feel more comfortable taking on debt.

"Lenders are not only making more auto loans, but lending more to borrowers with less-than-perfect credit," Turek explained.

While borrowers are being more diligent about their auto loan payments, they also are carrying larger balances.

The average amount of auto loan debt owed by borrowers in the second quarter rose nearly 6 percent from a year earlier to $13,427. 

Banks are making more auto loans and that's helping drive up average auto debt per borrower, said Turek.

That's because new loans tend to have higher balances early on, as it typically takes several years for borrowers to pay them down.

But the good news remains, The rate of overdue auto loans is now at its lowest in more than 10 years. The auto-delinquency rate has fallen on an annual basis for 11 consecutive quarters.

TransUnion calculated data from a random sampling of about 27 million credit reports to reach its conclusions.