NEW YORK — The automotive loan asset-backed securities (ABS) market is slowly rebounding with the help of the federal Cash for Clunkers (C4C) program, which created an uptick in the new vehicles sales volume, said ratings firm DBRS.

The U.S. Department of Transportation reported that nearly 700,000 new vehicles were sold in August under the C4C program. This boost in new vehicle sales, along with the Federal Reserve’s Term Asset-Backed Lending Facility and the re-emergence of cash investors, are helping in the recovery of the auto ABS market, DBRS said.

The securitization market has been hit hard by the auto industry’s record lows in inventory levels and vehicle sales volume, which continue to remain below what they were before the recession. As manufacturers downsize their inventory to meet lower demand, they require smaller or less frequent securitization financing, analysts said.

New vehicle inventories are at the lowest they have been, at 1.4 million cars, compared to the 3 and 4 million units recorded during the 2006 to 2008 timeframe. And vehicle sales volume will need more time before it returns to the levels it achieved in 2006 and 2007, analysts said.

The auto industry’s slow recovery from record lows in sales volume and inventory levels is hindered by declining consumer confidence, rising unemployment, stagnant household incomes, and questions about the long-term viability of the Detroit Three — despite Chrysler and General Motors quick exit from bankruptcy. However, the success of the C4C program demonstrates that purchasing power is still available in the consumer market, even if consumers are using it cautiously, the ratings firm said.

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