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Fitch: Subprime Auto ABS Losses Creep Up, Prime Stable

Annualized net losses for prime auto loan ABS declined on a monthly basis in October, while subprime losses rose 32 basis points to 9.61%, according to the ratings agency. Subprime ANL, however, remain within levels recorded earlier this year.

by Staff
December 1, 2016
2 min to read


NEW YORK — Losses fell for U.S. prime auto asset-backed securities (ABS) while subprime losses continues their slow climb in October, according to Fitch Ratings latest monthly index results.

Annualized net losses for prime auto loan ABS declined on a monthly basis in October, while subprime losses rose 32 basis points to 9.61%. Subprime ANL, however, remain within levels recorded earlier this year.

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Prime 60-plus day delinquencies declined to 0.42% in October, improving 4.5% month over month. On a year-over-year basis, the rate was 11% higher. Subprime delinquencies were 5.07%, virtually unchanged from 5.05% recorded in September but 11% higher on a year-over-year basis.

Prime ANL declined 0.68% in October, down two basis points vs. the prior month but still 27% higher from a year ago. Prime losses have ranged from 0.43% to 0.70% this year.

Subprime ANL in October crept up 3% from September and were 19.4% higher on an annual basis. The 9.61% rate recorded in October was the highest since this past February’s 9.74% rate. Despite the small increase in losses last month, the pace of monthly increases slowed vs. the prior four months, Fitch noted. Subprime ANL have ranges from a low of 6.32% (June) to a high of 9.74% (February) this year. They continue to trend higher this year consistent with prime index trends.

“Wholesale vehicle values continue to decline over the past month. This is translating into lower recoveries for auto ABS as auto values move off peak rates recorded earlier this year,” Fitch noted in its report. “The Manheim Used Vehicle Value index declined to 126 in October, down from 126.9 in September to the lowest level since June.

“The index is still at solid levels overall in 2016, and recent declines have been minimum,” the firm added.

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Most vehicle segment are experiencing lower values with rising depreciation, including trucks and SUVs which have been very strong this year but have come down off recent highs. “The fall months are typically the weakest period of the year as dealers look to clear their lots to make way for the new incoming 2017 models,” the firm noted.

“The performance declines still have no adverse effect on ratings performance in 2016,” ratings agency added. “Fitch upgraded 67 classes of subordinate notes in 2016 through late November, down slightly from 77 last year. Looking ahead, Fitch has a positive ratings outlook for the prime sector and a stable outlook for subprime ratings despite recent loss increases.”

Fitch’s auto loan ABS indices total $97 billion of outstanding securitized collateral, of which 59% is prime and 41% subprime.

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