Iowans and Nebraskans owe less money on their vehicles and are more current on their payments than the national average, but auto loan delinquencies have crept up slightly over the past two years.

Figures from a financial services firm indicate residents of the two states are conservative, keeping vehicles longer, making bigger down payments and not spending as much, said Peter Turek of Detroit, automotive vice president in TransUnion’s financial services group.

“It looks like they’re doing a very good job of managing debt, at least auto loan debt, compared to the national average,” Turek said.

Over the past six months the share of auto loans that are more than 60 days overdue has declined in the states, possibly because of tightened loan standards and stepped-up collection practices by lenders, he said.

The U.S. delinquency average also was down in the latest quarter, although rates nationally and in Nebraska and Iowa are up from early 2006.

TransUnion, which is based in Chicago, computes the figures from about 3 million consumer loan records it receives from lenders. The records do not have the consumers’ names.

For the first quarter this year, Nebraskans’ average auto loan balance was $10,635, which was 49th among the states and just ahead of Michigan. Iowa was 31st at $12,057. The U.S. average was $12,833. Nevada had the highest, $16,034.

A key factor in loan balance is how close borrowers are to paying off loans, Turek said, so Nebraskans may be keeping their cars longer than average before borrowing to buy new ones.

TransUnion said 0.47 percent of auto loans in Nebraska were 60 or more days overdue, 42nd in the country. Iowa’s 0.40 percent delinquent rate ranked 47th. The national average was 0.65 percent overdue.

Louisiana had the highest delinquency rate, 1.19 percent, and North Dakota the lowest, 0.30 percent.

Turek said delinquency rates typically decline in the first quarter of the year. But this year’s decrease was more than twice the average decrease of the previous six first quarters.

Delinquency rates spiked somewhat at the end of 2007, and lenders responded, he said. “They’ve been able to turn that around a little bit.”

For example, lenders might call a consumer five or 10 days after a missed payment, rather than sending a letter. Lenders also may be tightening borrowing standards, meaning more people are able to make their payments.

Turek said the U.S. auto loan delinquency rate may continue to increase in coming quarters, although conservative lending standards and stepped-up collection efforts could bring it back down by the end of this year.

TransUnion reports on 60-day delinquencies because that’s when lenders begin to foresee potential loan losses, he said.

Could gas at $4 a gallon or higher be one of the culprits behind late car payments, too?
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Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pa., said auto loan delinquencies will keep climbing for another 12 months. By his estimate, auto delinquencies would hit a peak in the second half of 2009.

His reasoning? We’ll be looking at a weaker job market, falling values for SUVs and trucks, high levels of debt — and yes, budget-busting gas prices.

Think of it this way: If some consumers are already paying an extra $65 to $70 a month to put gas in one car, they have even less money to put toward a $400 or $500 monthly car payment.

And what happens at $5 a gallon?
Late loans rising

Auto delinquencies have been on a fairly steady uptick.

The percentage of auto loans 30 days or more overdue hit 1.92% in the first quarter — up from 1.9% for the fourth quarter of 2007 — for loans made directly to the consumer by banks or credit unions, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin. The percentage was 1.68% for the first quarter of 2007.

The percentage of overdue auto loans hit 3.09% for loans made through auto dealers or third parties, according to the American Bankers Association. That’s down from 3.13% for the fourth quarter in 2007.

However, auto delinquencies for loans made through dealers have shot up since late 2004 when the rate was 1.35%.

Zandi said his numbers indicate that auto delinquencies are showing no signs of stabilizing.

Debt pressure builds

Families are facing a financial squeeze on many fronts.

James Chessen, chief economist at the American Bankers Association in Washington, D.C., said consumers are finding themselves with fewer resources to manage debt, as they cope with rising food prices, rising gas prices, cuts in overtime hours, job losses and little income growth.

“Increasingly, it’s a story about a broader economic slowdown,” Chessen said.

Late payments on home-equity lines of credit hit an 11-year high in the first quarter, according to the American Bankers Association.

Higher gas prices put more of a squeeze on households.

In Michigan, the average price for regular gas hit $4.18 a gallon as of July 3, according to AAA Michigan. That compares with $3.07 a gallon a year ago, $2.99 a gallon in 2006 and $2.29 a gallon in 2005, according to Nancy Cain, a spokeswoman for AAA Michigan.

Someone who drives 15,000 miles a year — and gets 20 miles a gallon — would now be paying roughly $260 a month for gas — up from about $192 a month last year.

Brian Bethune, chief U.S. financial economist for Global Insight in Lexington, Mass., said troubles for auto loans won’t improve until the housing market turns around.

After all, many overstretched consumers may try to pay the mortgage before making a car payment — especially if that car is an SUV or truck that’s dramatically declining in value because of higher gas prices.

Contact SUSAN TOMPOR at 313-222-8876 or stompor@freepress.com.