NEW YORK--(BUSINESS WIRE)--Weaker seasonal trends led to annualized net losses (ANL) on U.S. subprime auto ABS reaching their highest level since 2009, according to the latest monthly index results from Fitch Ratings.
Subprime auto loan ABS ANL rose 4.5% month-over-month (MOM) to 8.19% last month, the highest level since February 2009 (9.07%). Prime ANL also crept higher in January. That said, the weaker auto ABS performance is typical for January as consumers get back to work following the high spending holiday season.
Despite last month's weaker performance, improving seasonal patterns should kick-start stronger performance between February and April, when consumers start receiving tax refunds and pay down debt.
Prime 60+ day delinquencies rose to 0.45% in January over December, a 15% increase and were 15% higher year-over-year (YOY). ANL hit 0.43%. This represents a 16% increase but still well within levels recorded over the past year and slightly lower than in January 2014 (0.47%). Overall, prime asset performance remains solid even as levels move very slowly off record lows seen in the prior 18 months.
In the subprime sector, 60+ day delinquencies rose to 4.75% in January, a 7.7% move higher and were 24% above the same period in 2014. This is the highest level recorded since October 2009 (4.76%). Meanwhile, ANL rose 4.5% MOM in January hitting a five-year high when 9.07% was recorded in early 2009. Asset performance has slowed over the past two years driven mainly by softer underwriting and collateral credit quality in securitized pools.
Despite the weakness in the subprime sector, losses remain within initial forecasts and below recessionary levels for securitizations rated by Fitch. Fitch only rates transactions issued by General Motors Financial's AMCAR and Santander Consumer USA's subprime ABS platforms in the sector. As mentioned previously, Fitch does expect asset performance to improve in the subprime sector in the coming spring months, with current delinquency and loss levels to taper off and improve over the next three-to-four months.
The wholesale vehicle market saw improvements in January for the fourth straight month. While still a surprise, this will continue to support overall asset performance in coming months. The Manheim Used Vehicle Value Index rose to 1.1% MOM and was up 2.5% YOY. The market is being supported by strong consumer demand, including solid used sales and a jump in certified pre-owned vehicle sales.
On a segment basis, pickups and trucks are performing strongly followed by vans and SUV/CUVs. Compact cars appear to be under some pressure in January dropping 0.5% due to abundant supply and lower gas prices driving consumers away from these models to larger vehicles.
Fitch does expect wholesale values to come under pressure in 2015 given higher volumes coming to market from increased lease maturities and returns expected, as well as higher trade-in volumes given the expectations for strong new vehicle sales in 2015. Used supply is expected to rise by over 10% in 2015 over 2014. Additionally, depreciation should pick up as a result and rise from around 11-12% last year to the 14-15% mark, on an annual basis this year.
Fitch upgraded eight subordinate note tranches in January, up from three in January 2014. The outlook for asset performance in the sector is stable and positive for ratings performance. Fitch's indices track the performance of $70 billion worth of outstanding auto loan ABS, of which 67% is backed by prime auto loans and remaining 33% subprime ABS.
Additional information is available at 'www.fitchratings.com'.