The auto loan sector has lately become a darling of the ABS market, with issuance growing by leaps and bounds.
Standard & Poor’s predicted on Oct. 16 that auto securitization issuance would total $100 billion this year, a 47% increase from 2011.
But at least one speaker at Information Management Network's ABS East saw a potential bubble forming in the subprime segment. “The number of lenders jumping into that space looks like something we’ve seen before,” said Kevin Duignan, global head of structured finance at Fitch Ratings, making a reference to the subprime mortgage market. He acknowledged that the U.S. consumer was in much better shape than before the crisis, but that nonetheless underwriting standards for these loans could deteriorate.
Another speaker, Tony Hughes, a senior director at Moody’s Analytics, said the housing boom had some particular dynamics at work during its own bubble that do not lend themselves to the auto market. For instance, people would be unlikely to end up speculating on the prices of used vehicles in the way that mainstream Americans did on houses by buying and flipping.