Subprime Auto Delinquency Is Near Crisis Levels at Non-Bank Lenders

Almost 9.7 percent of subprime car loans made by non-bank lenders -- including private-equity-backed firms catering to car dealers -- were more than 90 days past due in the third quarter, the highest rate in more than seven years, according to the New York Fed's quarterly report on household debt and credit. That's more than double the 4.4 percent delinquency rate for subprime loans made by traditional banks, a number that's been falling pretty steadily since the end of the financial crisis.

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Auto finance companies have long dominated the subprime lending area, originating and holding more than 70 percent of auto loans for the riskiest borrowers, according to the New York Fed. Their share has almost doubled since 2011 and now comprises more than $200 billion after years of booming car sales and fierce competition. Meanwhile, many traditional banks have been trimming their portfolios to curb exposure to riskier auto loans.

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There's $1.2 trillion in auto loans outstanding in the U.S., up $23 billion from the previous quarter. About 20 percent of new car loan originations are subprime, meaning the borrowers have a credit score below 620, according to the Fed report.