Auto Loans, Lease Originations Soar in Second Quarter

Auto loan and lease originations follow the industry pattern for the second quarter: a record total and huge gains vs. the second quarter of 2020, when COVID-related business shutdowns peaked, and also hefty gains vs. the pre-COVID second quarter of 2019.

That’s according to the latest Quarterly Household Credit Report from the New York Federal Reserve Bank. Originations are nationwide statistics, which include new- and used-car loans and leases combined.

“This is a serious high” of $201.9 billion in auto originations for the second quarter of 2021, an increase of 48.6% vs. the second quarter of 2020, and up 29.8% vs. the second quarter of 2019, say researchers for the New York Fed. “There is an increase in both the number of loans and the size of loans.”

However, borrowers with subprime credit continue to lose share within the overall increase. The share of auto originations for borrowers with credit scores below 620 fell to 17.4% of the second-quarter total, down from 18.5% a year ago, and from 21% two years ago, one of the few patterns that stays consistent among the three time periods.

New York Fed researchers say they’re monitoring the expiration of temporary forbearance programs to see how that might affect auto loan and lease delinquencies. Lenders put the programs in place last year because of the pandemic.

Millions of borrowers have been able to postpone monthly payments on auto loans and on mortgages, but those programs are set to end unless they’re extended. Assuming the programs end, delinquencies are likely to go up for both auto loans and mortgages, but it’s yet to be determined how much.

For now, auto-loan delinquencies of 90 days or more are down, to 4.35% of the total outstanding balance, vs. 5.03% a year ago, and 4.64% in second-quarter 2019.

“We are keeping a close eye on auto loan forbearance,” the New York Fed researchers say. “There had been fairly high subprime (auto) lending, leading into the pandemic.”

In a press briefing Aug. 3, the researchers ask not to be quoted individually by name, in keeping with New York Fed policy. The authors of the Household Credit Report all belong to the New York Fed’s research and statistics group. They are: Andrew Haughwout, senior vice president; Donghoon Lee, an officer in the group; Joelle Scally, senior data strategist; and Wilbert van der Klaauw, senior vice president.

Loan originations