CarMax Auto Owner Trust returns to raise $1.1 billion in asset-backed securities, amid sustained pricing resilience in the market for used cars.
CarMax Auto Finance, the financing arm of sponsor CarMax Business Services, originated the loans collateralizing the pool, about 55,644, according to Fitch Ratings. Used car and light-trucks or sports utility vehicles (SUVs) make up almost the entire portfolio.
Barclays Capital is the underwriter on the transaction, CarMax Auto Owner Trust 2022-4, which will issue notes from seven tranches in a senior-subordinate capital structure. The class A notes benefit from about 8.16% of subordination, while subordination levels are 5.62% and 3.28% for classes B and C.
Aside from subordination, the notes will also benefit from a reserve account funded at 0.40% of the initial pool balance. It is also non-declining, with a target and floor at the same level. Also known as COAT 2022-4, overcollateralization as as a percentage of the initial pool balance is initially 2.40%, which was higher than 2022-3. Both the target and floor overcollateralization are 2.40%.
In one positive for the notes, delinquency and loss rates have been strong in recent years. Delinquencies and cumulative net losses, however, were up as of the eight months that ended on August 31. Reduced frequencies of defaults and strong used vehicle values have buoyed those performances, according to the rating agency.
In terms of used vehicle values, the U.S. Bureau of Labor Statistics estimate that since September 1, 2022, prices on used cars and trucks had increased by 7.1% on a year-over-year basis.
On average, borrowers in the pool had current principal balances of $21,111 on their auto loans. On a weighted average (WA) basis, the loans have an APR of 8.8%; a loan-to-value (LTV) ratio of 88.0%, an original loan term of 66.3 months; and a FICO score of 713.
The pool is a bit geographically concentrated, with the top five totaling 50.6% of the pool, which aligns with the most recent COAT transactions since 2017. In the current deal, California makes up 17.8% of the pool; Texas, 12.5%; Florida 8.2%; Georgia, 6.7%; and North Carolina, 5.4%.
Fitch says it expects to assign an 'F1+' rating to the $201.6 million, A-1 notes; 'AAA' on the 'A-2 through A-4 notes; 'AA' on the class B notes; 'A' on the class C notes and 'BBB' on the class D notes.
