Fitch: Losses Creep Up for U.S. Subprime Auto ABS; Prime Stable

NEW YORK--()--Losses fell for U.S. prime auto ABS while subprime losses continued their slow climb last month, according to the latest monthly index results from Fitch Ratings.

Prime auto loan ABS annualized net losses (ANL) declined on a monthly basis in October, while subprime losses rose 32 bps to 9.61%. Subprime ANL remain within levels recorded earlier this year.

Prime 60+ day delinquencies declined to 0.68% in October, improving 2.7% month-over-month (MOM). The rate last month was 27% higher year-over-year (YOY). Subprime delinquencies were 5.07% virtually unchanged from 5.05% recorded in September and 11% higher on a yearly basis. Prime ANL declined to 0.68% in October, down two bps versus the prior month but were still 27% higher versus October 2015. Prime losses have ranged from 0.43%-0.70% in 2016.

Subprime ANL crept up 3% MOM in October and were 19.4% higher on an annual basis. The 9.61% rate recorded last month was the highest since 9.74% in February this year. Despite the small increase in losses last month, the pace of monthly increases slowed versus the prior four months. Subprime ANL have ranged from a low of 6.32% (June) to a high of 9.74% (February) in 2016, and continue to trend higher this year consistent with prime index trends.

Wholesale vehicle values continued to decline over the past month. This is translating to lower recoveries for auto ABS as auto values move off peak rates recorded earlier this year. The Manheim Used Vehicle Value index declined to 126 in October, down from 126.9 in September to the lowest level since June. The index is still at solid levels overall in 2016, and recent declines have been minimal.

Most vehicle segments are experiencing lower values with rising depreciation, including trucks and SUVs which have been very strong in 2016 but come down off recent highs. The fall months are typically the weakest period of the year as dealers look to clear their lots to make way for the new incoming 2017 models.

The performance declines still have no adverse effect on ratings performance in 2016. Fitch upgraded 67 classes of subordinate notes in 2016 through late November, down slightly from 77 last year. Looking ahead, Fitch has a positive rating outlook for the prime sector and stable outlook for subprime ratings despite recent loss increases.

Fitch's auto loan ABS indices total $97 billion of outstanding securitized collateral, of which 59% is prime and remaining 41% subprime collateral.

Additional information is available at www.fitchratings.com

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Fitch Ratings
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+1-212-908-0214
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10014
or
John Bella, Jr.
Managing Director
+1-212-908-0243
or
Media Relations:
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 10014
or
John Bella, Jr.
Managing Director
+1-212-908-0243
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com