Bad News For The Auto Sector? CNBC Reports Delinquencies In Subprime Loans On The Rise

The auto industry could be in trouble, as CNBC reported delinquencies in subprime auto loans are on the rise.

CNBC, citing data from Fitch Ratings, stated that delinquencies of at least 60 days for subprime auto loans have risen by 13 percent month-over-month in July and are higher by 17 percent compared to the same month a year ago.

Subprime asset-backed securities' annualized net losses have also risen, and this could "spook" auto loan buyers. As if the report wasn't troubling enough, Fitch's data also showed prime auto loans were 21 percent more delinquent in July compared to last year.

CNBC noted that the total amount of auto loans now exceed $1 trillion, as borrowers took advantage of more attractive terms, including longer time to repay the loans.

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"Increased losses are emanating from weaker collateral pools in the 2013-2015 transactions, which have weaker credit quality including lower FICO scores, higher amounts of extended term loans (over 60 months) and higher LTVs [loan to value ratios]," CNBC quoted Fitch Ratings analysts as saying in a report.

However, there are some pieces of data that support the auto industry. Specifically, CNBC stated that used vehicle values are "defying expectations" and are "remaining healthy" so far this year. In addition, the low unemployment rate is also a "a key signal for the borrowing economy."

First Trust Exchange-Traded Fund II CARZ, an auto-sector-tracking ETF, is down over 8 percent year-to-date, but flat over the last month.

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