NEW YORK--()--Prime and subprime U.S. auto ABS losses have risen in recent months, though the trend is likely to be fleeting as the sector enters a seasonally strong period, according to the latest index results from Fitch Ratings.
Prime annualized net losses (ANL) rose 5% in January recording the fifth consecutive increase. That said, prime losses are still at their lowest levels seen over the past 10 years. Additionally, losses are well below the strong 2005-2006 vintages (which ranged from 0.65%-1%). Fitch expects prime auto asset ABS performance to normalize through the year. However, it will remain historically low even as used vehicle values soften a little further and payroll taxes rise eating into consumers' monthly incomes.
Prime 60+ day delinquencies were up 10% in January to 0.43% from 0.39% in December, but 16% lower year-over-year (YOY). Prime ANL rose month-over-month (MOM) to 0.42% in January from 0.40%, but were 21% improved YOY. Prime cumulative net losses (CNL) remained at 0.29% in January, unchanged from December's level. CNL were 44% improved YOY, remaining within record low levels.
Fitch's outlook for prime auto ABS asset performance is stable, while the ratings performance outlook is positive. With seven upgrades in January, Fitch expects more upgrades through the year. This should help the number of positive rating actions outpace 2012's rate even as losses are expected to increase.
In the subprime sector, 60+ day delinquencies rose 3% MOM to 3.74% in January, while ANL improved by 4% MOM to 6.62%, down from 6.92% in December.
The Manheim Used Vehicle Value Index slid to 123.4 in January from 124.1 in December, a 0.6% decline following the bump in values in December seen from replacing vehicles after Hurricane Sandy. Used vehicle volume is expected to grow this year, as more people trade in their old vehicles for new ones along with high lease turn-in volumes, resulting in lower but still healthy wholesale vehicle values in 2013.
Fitch's auto ABS indices comprise of $64.15 billion of outstanding notes issued from 118 transactions. Of this amount, 72% comprise prime auto loan ABS and the remaining 28% subprime ABS.
Additional information is available at 'www.fitchratings.com'