Fitch: Losses for U.S. Subprime Auto ABS Top 8% as Prime Inches Higher
Minor cracks continue to emerge for both U.S. prime and subprime auto ABS loss trends, according to Fitch Ratings.
Subprime annualized net losses (ANL) rose for the fifth consecutive month to 8.05% in October further diverging from prime ANL trends. Despite weaker asset performance, Fitch-rated subprime auto loan ABS are still performing well within initial expectations heading into the end of the year.
Prime and subprime ABS asset performance continues to perform well within historical levels supporting positive rating actions across both sectors throughout the year. Fitch upgraded 66 tranches of outstanding prime and subprime auto loan ABS notes in 2015 through October, up from 63 during the same period in 2014.
Looser underwriting including lower FICO scoring, higher loan-to-values (LTV) and extended loan terms witnessed in 2013-2014 vintage securitized ABS pools are contributing to softer asset performance in late 2015.
Prime ANL reached a four-year high of 0.53% in October (virtually unchanged over September), and were 33% above year-earlier levels. Prime ANL remain well below the historical average figure of 0.93% going back to January 2001. Prime 60+ day delinquencies rose to 0.38% in October, up from 0.39% the prior month. Delinquencies were only 5.6% higher last month versus a year earlier.
Subprime ANL remain well below the peak recessionary levels of 10-13% recorded in late 2008/early 2009 period. The October ANL figure was also just 5.8% higher versus the same month in 2014. Subprime 60+ day delinquencies rose to 4.56% in October, up 2.2% over the prior month and 13.4% higher versus October 2014. The peak delinquency range was 4.75%-5.10% recorded during the recent recession.
Solid used vehicle values in late 2015 are supporting auto ABS performance. The Manheim Used Vehicle Value Index hit 125.3 in October, rising five consecutive months during a period which typically the weakest of the year. The index was at a high in October, consistent with January's rate. The index peak was 127.8 recorded in May 2011.
Factors supporting used vehicle values include a healthy new vehicle market with sales topping 18 million units (seasonally adjusted annual rate) in October, along with solid demand for used vehicles and readily available financing and low interest rates.
Fitch's auto ABS indices comprise $92.2 billion in outstanding notes, of which prime auto loan ABS comprises 61% and subprime ABS 39% of that total dollar amount.
Additional information is available on 'www.fitchratings.com'
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
John Bella, Jr.
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