NEW YORK--(BUSINESS WIRE)--Prime annualized net losses (ANL) crept up 3% in August over July's level, showing much less of an increase during this historically weaker period, according to Fitch Ratings. Further, used vehicle values were strong in August, not typical for this month, helping to contain loss severity on defaulted loans.
Prime 60+ days delinquencies were 0.33% in August, unchanged from July, and 10.8% lower year-over-year (YOY), and have averaged 0.34% in 2013, down from 0.39% in 2012. As with losses, delinquencies continue to be low historically entering the weaker fall months.
Prime ANL were at 0.32% in August, just one bp higher over July. August's rate was 28% higher YOY, but still remains low historically. Prime cumulative net losses (CNL) were 0.26% for August, 3.7% lower month-over-month (MOM) and 18.8% lower YOY. The 2013 CNL vintage is producing the best annual vintage performance to date.
In the subprime sector, 60+ days delinquencies were stable MOM at 3.21%, only 2.6% above July, and virtually unchanged YOY. Subprime ANL did jump 18.4% MOM to 5.27% in August, but were 1.0% below the level recorded in August 2012.
While some softening occurred since the summer and into fall, the wholesale vehicle market (WVM) unexpectedly picked up speed in August with values rising over July.
The Manheim Used Vehicle Market Index stood at 122.3 at the end of August, increasing for the third consecutive month this year which Fitch notes is not a normal pattern as typically used prices slow during this time of the year.
Strong demand for cheaper late model vehicles, high new vehicle pricing and low inventories are all supporting the strength of used vehicle values currently. Further, the gradually improving economy, including the stronger housing and jobs markets, continue to buoy demand for both new and used vehicles in the U.S.
Strengthening WVM values helped bolster asset values and overall performance year-to-date 2013, keeping a lid on loss severity and loss rates. Despite current strong values, Fitch does expect used vehicle values to retreat over the next year as used vehicle supply rises driven by several factors, including increasing off-lease vehicle returns.
The outlook for asset performance is stable in 2013 while the rating outlook is positive. Fitch upgraded 28 outstanding classes of prime auto ABS notes in 2013 year-to-date, compared to 24 upgrades issued in 2012 during the same period. Fitch expects the rate of positive rating actions to continue through December, and overall be stronger this year than in 2012.
Fitch's prime and subprime auto ABS indices are comprised of $67.3 billion of outstanding notes issued from 127 outstanding transactions. Of this amount, 68% comprise prime auto loan ABS and the remaining 32% subprime ABS.
Additional information is available at 'www.fitchratings.com'