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Fitch: Prime U.S. Auto ABS Off to Solid Second-Half Start

August 2, 2012

NEW YORK — Prime annualized net losses (ANL) dropped 22 percent in June vs. May to a new record low of 0.14 percent, mainly driven by strong 2010-2012 originations.

Prime delinquencies were stable in June with 60-plus day delinquencies up by just two basis points to 0.40 percent, a 5.26 percent from May but a 16.67 percent year-over-year decline. Prime cumulative net losses (CNL) also exhibited improvement in June and were 7.50 percent lower than in May.

Economic growth and solid wholesale vehicle values since 2011 have paved the way for improved loss performance for prime and subprime sectors in the past year, ratings agency reported.

“However, volatility in the U.S. economy continues, as the economic outlook in the near term remains weak, and the European financial crisis evolves, dampening growth prospects in the U.S. Further, the job market is still weak with few jobs created as companies remain skittish on expanding and hiring new workers,” read the report from Fitch.

In the subprime sector, 60-plus day delinquencies were at 3.12 percent in June, 20 percent higher on both a month-over-month and year-over-year basis. Annualized net losses increased month over month by 4 percent to 3.91 percent. That represented a 6.7 percent improvement year over year.

“The Manheim index has seen a steady slide over the past four consecutive months, declining most recently to 123.4 in June from 125.1 in May, as supply and demand in the wholesale vehicle market level off,” Fitch stated. “Despite the recent leveling off, used vehicle values are healthy, and recovery rates in auto ABS transactions remain elevated.”

Used vehicle values have just come off their record highs in recent months, and June's level is still robust on a historical basis with both production and inventory levels tight, and demand for both new and used vehicles strong.

Fitch's 2012 outlook for prime asset performance is stable, while prime ratings performance outlook is positive and upgrades continue to be issued on a monthly basis, albeit at a slightly slower pace than in 2011.

Fitch's auto ABS indices comprise $53.34 billion of outstanding notes issued from 109 transactions. Of this amount, 80 percent is made up of prime auto loan ABS and the remaining 20 percent subprime ABS.

Additional information is available at www.fitchratings.com.

 

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