Subprime origination level at lowest point in 12 years


The latest information from Equifax reinforced the depth at which finance companies are backing off in their originations within the subprime space.

Equifax recently shared its observations of auto finance originations through January. Through that juncture, analysts found that 19.2 percent of retail installment sales contracts and leases were issued to consumers with a subprime credit score. Analysts indicated this is the lowest subprime share since 2006.

In 2017, Equifax pinpointed the year-to-date share at 20.3 percent.

“It is evident that banks, captives and lenders are focused on reducing their exposure to subprime accounts in automotive, but with the economy at healthy levels, there is also a smaller pool of subprime candidates shopping for vehicles compared with several years ago,” said Gunnar Blix, deputy chief economist at Equifax.

“There seemed to be more of a focus on pursuing subprime volume in 2017, and today lenders are looking to pull back a little and find more balance in their portfolios,” Blix continued.

Again, looking at data through January, Equifax found that 386,500 installment contracts and leases were originated with consumers with a VantageScore 3.0 credit score below 620. These are generally considered subprime accounts. That contract amount represents a 9.5-percent decrease year-over-year.

Analysts added that this newly issued paper has a corresponding total balance of $6.9 billion, constituting a 9.4-percent decrease year-over-year.

Looking throughout the credit spectrum, Equifax tabulated that 2.01 million total installment contracts and leases, totaling $44.1 billion, have been originated year-to-date. The figures marked a 4.1-percent decrease in accounts and a 2.0-percent decline in balances over this time last year.

Equifax pointed out that 2017 marked the third highest year on record for the number of auto accounts originated; 2016 is the record holder, followed by 2015.

The average origination balance for all contracts and leases issued in January came in at $22,205, according to Equifax. The figure represented a 3.5-percent increase over January 2017.

Also, the average subprime installment contract amount was $18,128, marking a 1.4-percent increase year-over-year.