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Fitch: 2009 U.S. Prime Auto ABS Exceeding Expectations

November 09, 2010

NEW YORK — Lower than expected losses for 2009 U.S. prime auto ABS loans are positioning this vintage for continued positive rating performance as the broader economy slowly improves, according to Fitch Ratings.

Through the first three quarters of this year, expected cumulative net losses (CNLs) on 2009 auto ABS loans are twice as low (1.3-1.5 percent) as losses for the 2008 and 2007 vintages (2.8-3 percent). The strong results come amid a slow start to the U.S. economic recovery and lingering fears of a double-dip recession. Fitch maintains a positive rating outlook for 2009 auto ABS.

CNLs for 2009 are more likely to wind up akin to pre-recessionary vintages (2005-2006), with numerous factors driving the better than expected performance, according to Fitch Ratings’ Director Brad Sohl. However, Fitch does not expect future prime auto loan ABS credit enhancement to drop materially from 2010 levels, which are down from those of 2009.

"The wholesale vehicle market has improved significantly and job losses are slowing," said Sohl. Most importantly, "the stronger credit quality and tighter underwriting of 2009 loans were an about-face from the loan attributes that worsened 2007 and 2008 vintage auto ABS performance."

Fitch expects performance to stay largely positive even in the face of high unemployment. That said, “future auto ABS performance remains susceptible to a potential double-dip recession and new job losses,” Sohl said.

 

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