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Auto Lease Residuals Still Trending Upward, Fitch Reports

December 21, 2011

NEW YORK — Residuals on U.S. auto lease ABS are still producing substantial gains vs. initial forecasts through third quarter 2011, according to the latest index results from Fitch Ratings.

Residual realizations on Fitch-rated auto lease ABS have exceeded the securitization value of returned lease residuals every month since July 2009, according to the agency. The index has continued to closely track Manheim Consulting's used vehicle value index, a good barometer for the health of the U.S. wholesale vehicle market.

The index showed gains of 14.5 percent relative to securitized lease residuals in September 2011. Gains decreased from 19.86 percent in June and 16.86 percent a year prior, but any residual gain is viewed as positive and compares well to peak loss levels of 20.70 percent in December 2008.

Used-vehicle supply is likely to remain constrained over the next 12 months, which is good news for positive residual experience on U.S. auto lease ABS. As factors like increased new-vehicle sales and lease volumes and increased residual value forecasts penetrate the secondary market, however, gains will likely subside.

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