SHAUMBURG, Ill. — Automotive loan delinquencies dropped during the second quarter of 2010, marking the second consecutive quarter that showed a year-over-year decrease in quarterly delinquencies. Lenders also made a higher percentage of loans to nonprime and subprime customers, a sign that lenders are beginning to loosen credit.

The 30-day delinquency rate fell 5.88 percent, from 3.07 percent in Q2 2009 to 2.89 percent in Q2 2010. The 60-day delinquency rate fell 11.85 percent, from 0.8 percent in Q2 2009 to 0.71 percent in Q2 2010.

The findings are part of an in-depth analysis of trends impacting the automotive industry entitled, State of the Automotive Finance Market, First Half of 2010.

“Seeing a drop in delinquencies year-over-year is a positive sign for both the lending and automotive industries,” said Scott Waldron, president of Experian Automotive. “The fact that we’ve seen a drop for the second consecutive quarter is an indication that there could be a light at the end of the tunnel for the economy.”

Lending institutions appeared to loosen credit, providing a higher percentage of loans to customers in the nonprime and subprime risk tiers. The percentage of nonprime and subprime loans for new vehicles grew a combined 4.5 percent, from 16 percent in Q2 2009 to 16.73 percent in Q2 2010. However, lenders were still cautious about new vehicle loans to the lowest risk tier, deep subprime, as the percentage of those loans dropped from 1.56 percent in Q2 2009 to 1.48 percent in Q2 2010.

“It appears as though lenders are testing the waters with customers who have less than stellar credit,” said Melinda Zabritski, director of automotive credit for Experian Automotive. “While lenders have not loosened their criteria to the levels we saw three years ago, we do see an upward movement in loans to those middle risk tiers. This could be a very positive sign for the auto industry, as it could open loans to a wider group of potential customers.”

Other findings include the following:

• The average credit score for purchasers of a new vehicle fell two points, from 774 in Q2 2009 to 772 in Q2 2010. The average credit score for purchasers of a used vehicle rose two points, from 677 in Q2 2009 to 679 in Q2 2010.
• The average amount financed for a new vehicle jumped by $883 to $25,222. The average amount financed for a used vehicle jumped by $1,027 to $16,581.
• The states with the highest average credit scores for consumers applying for new vehicle loans were Minnesota (803), Wisconsin (796), Iowa (795), Nebraska (791) and Montana (789).
• The states with the lowest average credit scores for consumers applying for new vehicle loans were Mississippi (749), Nevada (750), Louisiana (751), Texas (752) and North Carolina (759).

CHICAGO — The national auto loan delinquency rate will increase approximately 7 percent at the end of 2010 to 0.92 percent, up from an expected 0.86 percent at the conclusion of 2009, according to TransUnion’s annual auto loan forecast.

Only one state – California – is expected to see a decline in 60-day delinquencies by the end of 2010. The state’s auto delinquency levels should decrease 3.55 percent from approximately 1.40 percent to 1.35 percent.

“Our forecast indicates we will see auto loan delinquencies drop in the first and second quarters of 2010 due to many factors such as ‘Cash for Clunkers’ and tightening lending standards,” said Peter Turek, automotive vice president in TransUnion’s financial services group.

“Delinquencies will rise in the second half of 2010 as economic pressures, along with traditional spending patterns of summer vacations, back to school and the holidays, will continue to strain consumers. While the rate of increase should be relatively mild, it is a cautionary number to those expecting an abrupt turnaround in the auto finance industry.”

The expected increase will be the fifth straight year the nation’s 60-day auto loan delinquency rate will have either remained the same or increased from the previous year. Between 2004 and 2005 the nation’s delinquency rate dropped 4.35 percent from 0.69 percent to 0.66 percent. In addition, the first half decrease in delinquency rates followed by a second half in the year increase also is consistent with the cyclical pattern of previous years, with a new baseline being set with each yearly increase.

Areas in the country expected to experience the highest year-over-year auto delinquency increases include the Midwest and Southeast. Indiana (27.23 percent), Michigan (26.74), Kentucky (22.31) and Georgia (18.71) are among the states expected to see the greatest spikes in auto delinquency.

In addition to California, other parts of the country that have been hit hard by the mortgage crisis look to be slowly improving their credit picture on the auto side as many auto loans reach maturity. Both Florida (4.55 percent increase expected) and Nevada (4.05 percent increase) are among the top 10 states expected to see the least amount of increase in auto loan delinquencies.

At the conclusion of 2010, Mississippi (1.76 percent), Georgia (1.46 percent) and Alabama (1.40 percent) are expected to have the highest auto loan delinquency rates. The District of Columbia (0.34 percent), North Dakota (0.39 percent) and South Dakota (0.45) should have the lowest delinquency rates during that same time period. Current auto loan delinquency data for each state and the nation can be found at www.transunion.com/trenddata.