Bank of America Merrill Lynch expects issuance of securities backed by auto loans to hold steady in 2015 at about $100 billion. Continued growth in vehicle sales will be the driving factor; the bank’s economic team is looking for sales to increase 6.1% to 17.4 million units next year.
So why isn’t BofA calling for a 6% increase in auto loan securitization? The larger larger banks lenders and credit unions have not been active in the securitization market, which is instead dominated by so-called captive finance companies, those affiliated with manufacturers.
Meanwhile, aggregate pay downs of existing auto loan securitization, which is very short-dated, will be about $73.8 billion, leaving net issuance volume of $26.2 billion.
BofA’s new issue forecast for 2015 includes a combination of prime and subprime loans, retail leases, dealer inventor, rental car, and corporate lease ABS. It expects the mix between collateral should be fairly consistent with 2014, with retail loan and lease sectors accounting for 80% of the total and the balance in the commercial sectors.
Similar to prior years, the prime auto loan ABS should see the greatest share of new issue volume.
So far this year, new issue volume has increased 10.5% over the same period of 2013 to $92.5 billion. On a net basis, however, volume stands at $21.3 billion, slightly below $18.3 billion last year.
Total outstandings are $183.3 billion.
By the end of this year, BofA expect new issue volume to increase 10.1% year on year to $100 billion.