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U.S. Prime Auto ABS Delinquencies Stable; Subprime Jumps to 11-Year High

October 28, 2008

New York -- Stability was the word for the third straight month for U.S. prime auto ABS 60+ days delinquencies, while subprime auto ABS delinquencies hit an 11-year high, possibly paving the way for a notably weaker fourth quarter, according to Fitch Ratings.

Prime auto ABS 60+ days delinquencies were at 0.71 percent in September, the third consecutive month the index was at this level with no deterioration. Delinquencies of 60 days or more on subprime auto loan ABS rose to an 11-year high of 4.28 percent in September, an indication of potentially further weakness to come in fourth quarter-2008.

Despite the stable performance posted by prime auto ABS in September, the current climate remains pressured and volatile. Consumer fundamentals remain stressed given household debt levels and declining home values, as well as the deteriorating job market.

Furthermore, the U.S. economy is contracting while the stock market is adjusting itself lower posting large declines in September and October. Therefore, Fitch expects that the current state of the U.S. economy should translate into increased pressure on the performance of auto ABS during the fourth quarter, and ultimately result in higher loss rates in both the prime and subprime sectors.

The prime 60+ level of 0.71 percent is 9 percent higher than in 2007, which is relatively stable given the fall months historically produce the weakest performance of the year. As noted, subprime delinquencies sped up in September rising 18 percent from August's level, and were 40 percent above September 2007.

Annualized Net Loss (ANL) on prime auto ABS declined 3 percent in September over August, to 1.68 percent, moving off the record high of 1.73 percent set in August. On an annual basis, ANL were 78 percent above 2007 levels after being 101 percent higher in August, but remain elevated and similar to levels exhibited in early 2003, which was the last recessionary scenario. Subprime ANL were at 7.80 percent in September, a 19 percent jump over August, while being 38 percent higher than a year earlier.

Fitch continues to closely monitor prime and subprime auto ABS performance on an ongoing basis. Fitch's auto ABS indexes track approximately $59 billion worth of prime and subprime auto-loan ABS. Of this, 68 percent comprises prime collateral while the remaining 32 percent is made up of subprime collateral.

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