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Fitch: US Auto ABS Losses Increase, Further Weakness Expected

September 03, 2008

NEW YORK - Fitch Ratings' prime and subprime U.S. auto asset-backed security (ABS) performance indexes produced higher delinquency and annualized net losses (ANL) in July. Fitch expects loss rates to increase further during the fall, which is historically the weakest period of the year.

In July, ANL on prime auto ABS hit the highest level for the year at 1.42 percent, increasing 15 percent over June's level. ANL in July were 94 percent higher than in July 2007. The last time ANL were at this level was in late 2003/early 2004. Prime delinquencies rose to 0.71 percent, 14.5 percent higher than in June, and 37 percent higher than in July 2007.

In the subprime sector, ANL were at 6.56 percent in July, a 16.5 percent increase over June, and 45 percent above a year earlier. Subprime delinquencies rose 11 percent in July to 3.63 percent. Delinquencies were 30 percent higher in July versus the same period in 2007.

While the wholesale vehicle market did show signs of stabilization in July, Fitch remains unconvinced that the market will improve structurally in the short term. The wholesale vehicle market remains soft with considerable weakness in the truck and sports utility segments, along with lower recovery rates in the luxury vehicle space. Additionally, current economic conditions combined with poor consumer demographics will continue to constrain the used vehicle market.

Fitch's indexes track the performance of $65.2 billion of auto ABS, of which 69 percent comprises prime auto ABS and the remaining 31 percent subprime auto ABS.

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