A three-year lending boom to car buyers with flawed credit that helped push auto sales to a six-year high is starting to show signs of overheating.
The percentage of loans packaged into securities that are more than 30 days late rose 1.43 percentage points to 7.59 percent in the 12 months ended Sept. 30, the highest in at least three years, reports Standard & Poor's. "We're at this inflection point," says S&P analyst Amy Martin. "Now that they are opening the lending spigot, it's only natural that losses are starting to rise."
Delinquencies on subprime auto loans are likely to have increased more during the fourth quarter, the holiday period when consumers typically stretch their budgets, according to S&P.