Americans love their cars – that’s for sure. In some cases, they love their cars more than their homes, if that makes any sense. Anyone who worked in default servicing during the 2008-2013 period will likely tell you all kinds of anecdotes about borrowers who said they could no longer afford their mortgage payments but could continue paying, for example, $758.98 per month for the BMWs sitting in their driveways.
In its most recent Mortgage Monitor report, Black Knight Financial Services examines the pervasiveness of automotive loan debt among U.S. mortgage holders. What the firm found is that the aggregate amount of auto debt among mortgage borrowers in the U.S. is around $531 billion, with the average debt per borrower at around $20,500.
Importantly, the research reveals that the share of borrowers carrying auto debt is around 50%, which is the highest on record since Black Knight first started tracking the data in 2006.
Interestingly, although total outstanding balances on auto loans are up nearly 30% from 2011 and average debt per borrower is up by nearly 20%, the average monthly payment for borrowers with auto debt is only up 5%, or $25 per month, due to extended financing terms (some automakers are offering loans with six or seven years of payments) and low interest rates (some automakers are offering loans with 0% interest).
Black Knight’s research shows that borrowers who are seriously delinquent on their auto debt (90 or more days past due) are eight times more likely to be behind on their mortgage payments, as well. This is a stronger correlation to delinquency than Black Knight saw last month with regard to student debt delinquencies.
However, borrowers with auto debt in good standing actually have lower non-current mortgage rates than borrowers without, with 4.5% of the former being delinquent on their mortgage payments as opposed to 5.8% for the latter.
To arrive at the findings, Black Knight again merged credit bureau data with its McDash loan-level mortgage database.