I’m researching the performance of auto notes and would like to know what percentage typically end in default. I’m looking for any available data or insights that detail the default rates on these financial products.
Auto note defaults depend significantly on the portfolio mix and economic conditions, making a single percentage hard to pinpoint. Traditionally, overall default rates for auto loans tend to hover between 3-5%, but this average dilutes higher rates found among subprime loans and buy-here-pay-here financing. Default rates can spike in economic downturns or among loans issued to borrowers with weaker credit profiles. Those actively in the debt trading space often see rates that vary based on origination channels and regional trends. Assessing the risk requires looking at the specific market segment and loan quality rather than a single average.
I’d say it really depends on what kind of auto notes you’re looking at. Some data I’ve seen suggests that in more standard or prime auto loan portfolios, defaults tend to be pretty low — around 3% or so in normal economic times. But if you’re looking at riskier segments like subprime or buy-here-pay-here financings, the numbers can climb up to 5% or even higher, especially when there’s an economic downturn or the borrowers have weaker credit profiles. Honestly, it feels like a lot of it is about the specifics of the portfolio and the broader economic context, rather than a single percentage that applies across the board.
It’s interesting because while many reference figures around 3% for more conservative, prime auto loans, the real picture is a lot more dynamic these days. With growing pressure from rising interest rates and some recent shifts in regulatory landscapes, some lenders are observing a bit more stress, especially in segments that lean more towards subprime or alternative financing channels. I’ve seen some chatter that these riskier portfolios could tip a bit higher—all the way into the mid-single digits—when economic pressures mount. It seems that lender strategies are adapting by tightening underwriting and focusing more on credit stability, which might help lower defaults in prime areas even if the overall landscape remains a bit jittery. Just something to keep in mind if you’re tracking trends in auto finance. 