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Auto ABS Losses Spike in January as Consumers Struggle to Pay Auto Loans

February 19, 2009

New York -- Annualized net losses (ANL) on auto loan asset-backed securities (ABS) spiked in January as higher unemployment drove more consumers to default, according to Fitch Ratings. In addition, recovery rates on repossessed vehicles are hovering around historical lows, pushing losses further into the red.

"All consumer assets are under pressure and autos loans are no exception," said John Bella, managing director in Fitch's ABS group. "With unemployment set to climb further and auto manufacturers struggling, losses are expected to climb higher throughout 2009."

Fitch's prime ANL index hit 2.23 percent and 60+ days delinquencies 0.87 percent in January, both setting another round of record highs. ANL in January rose a substantial 13 percent over December 2008, and was 74 percent higher on a year-over-year basis.

Consumers fell further behind on their car payments as prime delinquencies rose 2.4 percent from December 2008, and 85 percent of transactions in the index rose month-over-month.

"Despite higher losses, credit enhancement in most transactions continues to build resulting in auto ABS ratings remaining stable," said Hylton Heard, Senior Director in Fitch's ABS group. "Fitch expects that stability to continue through 2009."

Prime transactions from 2007 and 2008 vintages are contributing the majority of losses to Fitch's loss indexes. These transactions are less seasoned, generally include weaker credit quality, higher loan-to-values, and longer loan terms, thus experiencing the brunt of the dismal economic conditions and industry issues affecting losses.

Fitch's indexes track the performance of $53.85 billion of prime and subprime auto ABS issued from 94 outstanding transactions. Prime loans compose 71 percent of the indexes and subprime the remaining 29 percent.

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