The consumer credit rise in February was mostly from auto loans, which is likely to support ABS issuance from the sector in the coming months, Standard & Poor's analysts stated in a report released today.
U.S. consumer credit rose a seasonally adjusted $8.7 billion in February after a revised $18.6 billion gain in January, according to the Federal Reserve.
S&P analysts reported that non-revolving debt (predominantly auto and student loans) comprised all of the gain, increasing $11 billion in February to $1.7 trillion. This comes after a $21.5 billion gain in January.
The revolving credit — mainly credit cards — dropped $2.2 billion in February to $799 billion following a $3 billion dip in January.
S&P analysts further reported that a higher number of consumers that have low FICOs are purchasing smaller and more fuel-efficient cars. They said that this is among the reasons for higher car sales and continued growth in auto-related ABS this year.
Sales of small fuel-efficient cars rose 20% in 1Q12 and the average FICO score for new-car buyers dropped from 737 in 2009 to 725 in early 2012, S&P analysts reported, citing J.D. Power. Easing underwriting standards could drive auto collateral losses higher next year, but analysts think that ABS ratings will remain stable.
S&P also looked at used-car prices, which were higher in March despite the high gas prices. According to S&P analysts, this is also a positive for auto loan and lease ABS product. They added that auto sales benefit from robust trade-in values.
They cited the Manheim Used Vehicle Value Index, which rose 0.3% in March and is up 1.6% from a year earlier.
Compact and midsize vehicle prices were strong in March, rising 5.1% and 3.6% year-over-year, respectively, while SUVs dipped 2% year-over-year, cited S&P analysts.