Late Car Payments on the Rise in U.S.

The rate of tardy car loan payments among subprime borrowers in the U.S. has climbed to a 6-year high, according to S&P Global Ratings Inc.

The credit rating firm says the proportion of subprime borrowers who are behind more than 60 days on car loans rose to 4.9% in August—the highest level since January 2010—from 4.1% a year earlier, Bloomberg News reports.

By comparison, the delinquency rate for prime loans was 0.5% in August compared with 0.4% in the same month last year, according to S&P Global.

The firm blames the increase in subprime lender delinquencies on intense competition that has prompted lenders to ease their qualification standards. Bloomberg cites research from the Federal Reserve Bank of New York that shows lenders rejected only 5.2% of car loan applications during the 12-month period ended in June compared with an 11.1% rejection rate for the 12 months ended October 2015.

Longer-term loans and a softening used-car market could make it more difficult for lenders to recover bad loans, S&P Global says. Bloomberg notes that car financiers, unlike mortgage lenders, aren’t required to verify that their applicants are able to repay their debt.