NEW YORK–Subprime auto loan borrowers are showing increasing signs of trouble in making monthly car payments on time.
According to data from Wells Fargo & Co. and first reported by Bloomberg, delinquencies on subprime auto loans packaged into bonds rose in January to 4.7%, a level not seen since 2010.
John McElravey, an analyst with Wells Fargo, said it’s a warning sign that more loans may end up in default down the road. What may be most troubling, however, is that the default rate is already climbing, up to 12.3% in January from 11.3% the prior month, according to Bloomberg.
Bloomberg noted that securities backed by auto loans are structured to absorb a portion of anticipated defaults, but concerns have mounted over the last year that cumulative losses on auto loan securitizations may end up exceeding initial estimates, thanks to declining underwriting standards.