Despite the different negative indicators, U.S.  auto  ABS  delinquency  and annualized net losses (ANL) improved  at  a  time  of the year when performance usually starts to deteriorate, Fitch Ratings said.

The  60+  day  delinquencies on U.S. prime auto loan ABS dropped 10.7% while ANL levels  dipped  5.4%,  this  despite  elevated  unemployment rates as well as declining consumer credit.

"Despite  the  temporary improvement in performance, we are entering the weakest  performance  period  of  the year,’ said Fitch Senior Director Hylton Heard.   ‘Given   the  continued  slide  in  consumer  credit,  elevated unemployment  and  tempering  of  vehicle  value  increases,  losses and delinquencies should remain at higher levels through January 2010.’

The  drop in prime auto ABS delinquencies to 0.75% is equal to the rate a year before. Loss levels benefit from improved recovery performance  as  vehicle  values  are still  at  elevated levels. With this latest  decrease,  prime  ANL  through  October  stands  at 1.57%.

Fitch expects  ANL  will  rise over the seasonally weaker winter months as well as approach the 2% level.

Loss  severity  is now moderated by strong used vehicle values, slowing 2009's loss rates. Reduced supply in the used  car  market, aside from other factors, is still supporting rising used vehicle  values  this  year. The Manheim Used Vehicle Value Index, which tracks  the  health  of  the  wholesale  vehicle market, posted a slight drop in October, although values  are still almost 20% higher compared with their December 2008 lows.

Declining  asset  performance  has not affected rating performance, with senior level bonds continuing to perform as expected. Fitch has upgraded 31 classes of notes through Oct. 31 of this year, compared with  33 over the same period in 2008.

The rating agency's indexes track the performance of over 100 transactions worth $65.3 billion in prime and subprime auto ABS.

Prime loans comprise 84%, and subprime loans the remaining 16%, according to Fitch.

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