Which States Have the Highest Auto Loan Delinquencies and How to Avoid Default
JB
Last updated 03/14/2024 by
Julie Bawden-DavisAmericans bought a record-setting number of new cars in 2016. Not surprisingly, along with those purchases also came a rise in auto loan debt. According to Federal Reserve, borrowers currently owe $1.2 trillion in auto loans. Unfortunately, about 3.9% — about $46.8 billion — of the total outstanding debt balance is 90 days past due.
Auto loan delinquencies in 2017 vary by state. Wondering how your state is faring? According to Experian’s State of the Automotive Finance Market report, more than 2% of auto loans are 30 days past due in several states.
Mississippi has the highest 30-day past due delinquency rate, at 3.33%. The lowest 30-day delinquency rate in the nation is tied at 1% for South Dakota and Oregon.
Keep reading to see how your state compares.
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2017 auto loan delinquency rates
Here are the percentage of auto loans 30 days past due by state as of the first quarter in 2017. See how your state stacks up.
Avoid becoming one of the auto loan delinquency statistics
Ideally, you want to make your car payments on time. This ensures that you don’t experience delinquency and overdue payment penalties. Staying current also keeps you from becoming one of the auto loan delinquency statistics.
Auto loan delinquency occurs when you are late on your payment. You aren’t considered in default until you haven’t paid for more than 90 days. At that point, the auto financing company will report your overdue status to the three major credit reporting agencies.
An auto loan default damages your credit score considerably. The default will remain on your credit report for up to seven years. This will likely make it difficult to get credit. When you do get credit, you’ll pay high interest rates. Defaulting can also affect your ability to rent an apartment and get a cell phone plan.
Defaulting on an auto loan and not becoming current with payments will also result in having the vehicle repossessed. This requires that you surrender the car to the auto loan financing company. Any payments you’ve made toward the car will be lost.
If you’re delinquent on your auto loan and facing default, consider the following solutions.
Ask your auto lender for a deferment
A little time to catch up financially may be all you need to avoid default. Many auto lenders will grant deferment, which is a temporary postponement of payments. Extensions take a certain number of payments and put them at the end of the loan. This gives you a few months off from making payments.
Deferment has its drawbacks, though. The payoff date for the loan is extended. Interest continues to accrue, which means you’ll pay more interest over the life of the loan. There may also be a processing fee.
The deferment will show up on your credit report, but its effect on your credit score is much less harmful than an auto loan default.
Refinance your auto loan
If you’re having difficulty making your auto loan payments, consider a refinance.
Most auto loan refinancing companies offer refinancing after you’ve paid on a loan for at least six months. You also typically need a loan balance of at least $10,000.”
Refinancing your auto loan can allow you to get a lower interest rate. You can also extend the loan so that you have lower monthly payments.
According to Don Chapman, Chief Marketing Officer of OpenRoad Lending, “Most auto loan refinancing companies offer refinancing after you’ve paid on a loan for at least six months. You also typically need a loan balance of at least $10,000.”
With a good credit score of 700+, you can refinance and get a low interest rate that lowers your monthly payment. Even if you have a low credit score, you may still be able to lower your monthly payment by extending the terms of the loan. This will mean paying more interest over the life of the loan, but it can help prevent default.
A variety of auto loan refinancing companies offer loans for subprime borrowers with credit scores of as low as 500-560, including OpenRoad Lending, SpringBoardAuto.com, USAA, and Capital One.
Avoid delinquency by keeping your car indefinitely
Avoid delinquency or default and save money in the future by not getting onto what auto finance expert Mike Arman calls, “the buy a new car every three (or five) years treadmill.”
Buy the car you want, pay it off, and keep it. The best car payment is no car payment. It’s impossible to be delinquent on that.”
Says Arman, “New cars are more costly every year and feature higher payments. Buy the car you want, pay it off, and keep it. The best car payment is no car payment. It’s impossible to be delinquent on that.”
Find out more about your auto refinancing options by visiting SuperMoney’s auto loan offer engine where you can compare auto loan companies and find the best rates.
JB
Julie Bawden-Davis is a widely published journalist specializing in personal finance and small business. She has written 10 books and more than 2,500 articles for a wide variety of national and international publications, including Parade.com, where she has a weekly column. In addition to contributing to SuperMoney, her work has appeared in publications such as American Express OPEN Forum, The Hartford and Forbes.
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