The percentage of outstanding auto loan balances that are 90 days past due has reached its highest level since the Great Recession, according to the country’s largest credit reporting firm.
Equifax Canada told Automotive News Canada on Friday that 0.97 per cent of all auto loans were 90 days past due in the fourth quarter of 2018. That’s the highest delinquency rate for auto loans since 1.08 per cent of auto loans were 90 days overdue during the third quarter of 2009, arguably the peak of the economic downturn.
The 90-day delinquency rate rose to 0.97 per cent from 0.84 per cent over the four quarters of 2018.
“It’s OK where it’s at now. So far it’s been a nice mild increase,” Bill Johnston, vice-president of data and analytics at Equifax Canada told Automotive News Canada. "The question is how much more momentum it’s going to gain.”
Johnston said rising delinquency rates usually lag behind sales slowdown, which is currently underway in Canada.
“We don’t see us hitting crisis levels anywhere in the short term,” Johnston said.
Rising interest rates are having an effect on delinquencies.
“Monthly payments are going up every time there’s a rate increase. We’re seeing a little bit of strain from people who have a home equity line of credit,” he said.
The percentage of lease payments also 90 days overdue in the fourth quarter hit 0.35 per cent.
The percentage of combined outstanding auto finance balances — including lease and loans — now stands at 0.77 per cent. It’s only been that high twice since the end of 2009.
Canadians are carrying a total of $52.1 billion worth of auto loans. They owe $24.4 billion in lease payments.
South of the border, the 90-day delinquency rate represented 4.47 per cent of the outstanding balance of auto loans in the fourth quarter of 2018.
RATES ON THE RISE
Overall, the national delinquency rate on debt excluding mortgages rose to 1.07 per cent, an increase of 0.4 per cent compared with the same quarter a year earlier. The rate fell or was flat in the youngest age groups, those between 18 and 55, while it increased for those older than 56.
Bill Johnston, vice-president of data and analytics, said the marginal increase in the national delinquency rate is masking underlying weakness in the country’s credit markets. He pointed to the third straight year-over-year increase in late payments for seniors, as wellas a trend of late payments in auto loans and leases.
The delinquency rate is up from the previous quarter’s 1.05 per cent, which was the lowest since at least 2013, figures show. The rate had been declining on a year-over-year basis since the end of 2016.
“The overall delinquency rate was up very marginally, but you’re starting to see it getting a little bit broader,” Johnston told Bloomberg earlier this week.
The 90-day delinquency rate on debt excluding mortgages for those older than 65 climbed for a third straight quarter to 0.96 per cent at the end of 2018, Equifax said. That’s a 7.2-per-cent increase from the fourth quarter a year earlier, and follows gains in the prior quarters of 4.3 per cent and four per cent.
Johnston says seniors have become “the first point of strain,” partly because, in many cases, they’re carrying large balances on their home equity lines of credit. The delinquency rate among seniors is still below the Canadian average, but it’s rising faster than any of the other age demographics, he said.
Mortgage delinquency “remained very low, but did trend higher in many regions,” Equifax Canada said in a statement. Manitoba posted a 19-per-cent increase in 90-day mortgage delinquencies, and Saskatchewan rose nine per cent. Quebec and Ontario also saw increases -- four per cent and two per cent -- breaking a trend of declines that stretched back to at least 2015.
Bloomberg contributed to this report.