The consumer's prolonged stressed state and seasonal pressures drove auto loan ABS losses and delinquencies higher in the most recent period, as reported by Fitch Ratings' latest auto loan ABS index results.
"Weaker used vehicle values driven by seasonal factors contributed to the worsening auto ABS performance," Hylton Heard, senior director at Fitch, said. "However, used vehicle values remain strong overall and declines were less than typically experienced during this time of the year."
Inspite of these pressures, the sector's performance seems to be stable through the end of 2010. Prime auto loan ABS annualized net losses (ANL) rose three straight months to 0.90% through September. This correlates with historical patterns where used vehicle values usually drop in September.
The prime ANL levels are projected to range from 1% to 1.30% and hold well below last year's levels. This falls in line with the 2009 and early 2010 collateral vintages's continued strong performance.
Prime ANL increased 34% quarter-over-quarter through September, but improved 46% over the same period in 2009. The ANL rate of 0.90% in September was within range of 0.85%-0.94% recorded during the same period in 2007.
Prime auto loan ABS delinquencies of 60+ days rose to 0.64% in September, increasing 12.3% from August, but significantly dipping over September 2009 by 23.8%.
Current delinquencies are comparatively in line with the ten-year total average for the index of 0.57% inspite of the high unemployment figures, low consumer confidence as well as rising personal bankruptcies.
In September, subprime 60+ day delinquencies rose to 3.89%. Even though the figure is 25.1% more compared with August, it is 21.7% lower versus a year earlier.
Meanwhile, the subprime ANL increased in September to 6.75%, rising 22.5% month-over-month. This represents a dip of 30.3% from last year's number. Because of the recent limited subprime auto ABS issuance, monthly subprime index results have been more subject to individual deal volatility.
The rating agency's outlook for prime and subprime auto loan ABS ratings performance is now Stable/Positive for the remainder of the year.
The primary catalysts that Fitch mentioned are the positive asset performance from the 2009 and 2010 vintages as well as the structural support features in the offerings. Through mid-October, 2010 rating upgrades have outnumbered 2009 levels by close to 4:1.
Its prime auto loan indices have reached around $39.7 billion issued from 73 deals, while the subprime indices comprising the performance of 20 offerings have reached $5.9 billion.