Fitch: Fall Patterns Drive Up Losses for U.S. Auto ABS

NEW YORK--()--The typically slower fall season is leading to higher losses for both prime and subprime U.S. auto ABS, according to the latest index results from Fitch Ratings.

Prime auto loan ABS losses jumped 23% on a monthly basis in September while subprime losses moved 20% higher. Delinquency rates also rose last month versus August levels. Fitch attributes the weaker performance to typical asset trends recorded during early fall.

Used vehicle values recorded their fifth consecutive monthly decline through September, which contributed to the slower asset performance in recent months. New 2015 vehicle model introductions started to hit showrooms last month and dealers discount existing models in order to clear them out, which impacts used vehicle values negatively.

Used vehicle values will likely soften in the remaining months of the year given rising used supply from off-lease returns and trade-ins. This will drive loss severities higher and ultimately push loss rates higher for auto ABS in October.

Prime 60+ day delinquencies climbed 14% higher on a monthly basis to 0.40% in September and were 11% higher year-over-year (YOY). September's rate was the highest level recorded since June 2012.

Prime annualized net losses (ANL) hit 0.46% in September rising 15% month-over-month (MOM) and 44% higher than a year earlier. Despite the notable YOY increase, losses are still low historically and below the solid 2005-2006 period.

Both subprime delinquency and loss rates hit their highest levels in over four years in September. 60+ day delinquencies were 4.34% in September climbing 23% MOM and 26% YOY. This was the highest level since February 2011 (4.81%).

Subprime ANL moved 20% higher MOM to 7.08% in September, and the rate was 46% weaker than a year earlier. September's rate was the highest since November 2005 (7.05%), and is expected to follow early winter patterns and weaken further in the next couple of months.

The fall and early winter months are typically the weakest months of the year for both prime and subprime asset performance so Fitch does not see cause for alarm. Current performance for 2012-2013 vintages is still tracking well below the weak 2006-2008 recessionary vintages. What's more, 2012-2013 auto ABS performance has improved slightly versus the solid 2005-2006 vintages.

Ratings performance remains on track to record one of the best years ever, with 55 upgrades this year (through September), up 100% over 2013.

Fitch's indices track the performance of $69 billion of prime and subprime auto loan ABS. Prime auto loan ABS comprises 67% of the indices and subprime the remaining 33%.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Hylton Heard
Senior Director
+1-212-908-0214
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
or
Eugene Kushnir
Associate Director
+1-212-908-0830
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Hylton Heard
Senior Director
+1-212-908-0214
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
or
Eugene Kushnir
Associate Director
+1-212-908-0830
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com