NEW YORK–The Federal Reserve Bank of New York has expressed concern over rising delinquencies in auto loans made to subprime borrowers.
While auto lending in 2016 is projected to hit a 17-year high, the bank said it sees an “increased level of distress” among millions of borrowers in the subprime category.
Specifically, the Fed bank said, during Q3 2% of subprime auto loan balances became at least 90 days delinquent, up from 1.6% in the third quarter of 2014.
“The increased level of distress associated with subprime loan delinquencies is of significant concern,” the New York Fed wrote in a blog post.
Other issues raised by the Fed include loan terms that are longer than many used vehicles will remain on the road, and a return of a practice that was widespread in the run-up to the recession in which some auto dealers were misstating borrowers’ incomes in order to get them into loans for which they are not qualified.