Fitch: U.S. Subprime Auto ABS Losses Climb to Four-Year High

NEW YORK--()--Losses were up for both U.S. prime and subprime auto loan ABS last month, with the latter reaching levels not seen since early-2010, according to the latest monthly index results from Fitch Ratings.

Subprime auto loan ABS losses climbed 4.6% in November. In the prime sector, annualized net losses (ANL) also crept up last month, though they remain low on a historical basis entering 2015.

Subprime ANL climbed to 7.96% in November to the highest level in over four years. ANL were 16.5% above the rate recorded in November 2013. Despite rising loss rates during the latter half of this year, subprime transactions are still performing within initial loss expectations. From a vintage standpoint, 2013 subprime auto loans are tracking slightly above 2012. That said, Fitch still forecasts loss levels for both vintages are still to finish below that of the weak 2006-2008 vintages.

Prime ANL rose to 0.47% from 0.40% in October. Even though this was a double-digit percentage increase, loss rates are still low historically entering the December holidays. The highest rate recorded in 2014 was back in February at 0.49%, so performance is stable going into 2015.

Prime auto loan ABS 60+ day delinquencies dipped nearly 6% in November month-over-month (MOM) down to 0.34% (in line with the prior five-month range). The rate was just 3% higher versus the level record a year earlier. Subprime 60+ day delinquencies saw a modest decline in November to 3.98%, 1% lower than October. The index was 13% higher compared to the same period in 2013.

Used vehicle values experienced a healthy bump in November, the second consecutive increase following on from five months of declines. The Manheim Used Vehicle Value Index was at 123.3 in November, up from 121.8 recorded in October. The small bump in recent months will help to contain loss severity on defaulted and repossessed vehicles. This is particularly true in the subprime sector, which is much more sensitive to changes in severity levels than the prime sector.

With the advent of the high-spending holidays and people working less, seasonal patterns typically produce marginally weaker performance in December. However, asset performance is on track to record a solid year in 2014 relative to the last five years.

Prime ratings performance remains on track to record one of the best years ever, with 65 upgrades this year (through November), up from 44 in 2013. Fitch's Rating Outlook for prime auto ABS is positive entering next year. Even with rising loss rates this year, most subprime subordinate note tranches from 2011-2012 were either upgraded by Fitch or had Outlooks revised to Positive this year.

Fitch's indices track the performance of $74 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'.

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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, New York
Sandro Scenga, +1 212-908-0278
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, New York
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com