NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: Canadian Auto Loan ABS ￢ﾀﾓ Minor Speed Bumps in 2016
A slowing economy, low oil prices and unemployment pressures should lead to minor speed bumps for Canadian auto loan ABS in 2016, though not enough to materially affect performance overall according to Fitch Ratings in a new report.
Elevated over the past 18 months, used vehicle values are expected to soften as supply rises in the latter half of this year. This coupled with GDP growth slowing, high household debt levels and pockets of weakness in oil-dependent provinces from low oil prices could make auto loans susceptible to marginally higher delinquencies and losses, according to Senior Director Hylton Heard. 'Like U.S. auto loans, the best days are behind us for Canadian auto ABS, but performance will remain within expectations,' said Heard. Further, the outlook for ratings performance is stable, with positive rating actions likely to continue for the remainder of the year.
One reason is consumer and bankruptcy laws, which are stricter in Canada and allow creditors to gain access to a borrower's assets and wages through the courts to pay down defaulted loans. This results in more disciplined consumer behavior in Canada supporting overall asset performance historically. Also helping is geographic concentration, with many Canadian ABS pools contained in the highest populated provinces including Ontario, Quebec and British Columbia. 'The highly diversified economies in these regions mitigate exposure to regional downturns, including slowdown in oil-dependent provinces like Alberta,' said Heard.
The prolonged slump in oil prices is also boosting consumer demand, particularly for larger vehicles of late. This coupled with the availability of cheap financing is making for a stable wholesale vehicle market. Fitch expects this trend to continue in 2016 though it will likely soften in the second half of the year as used vehicles entering the secondary market rise.
'Canadian Auto Loan ABS - Minor Speed Bumps in 2016' is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at www.fitchratings.com.