The performance of securities backed by both prime and subprime U.S. auto loans improved in February over January, according to Fitch Ratings.
Prime loans in ABS deals more than sixty days behind on payments fell to 0.41% in February from 0.43% in January.
Annualized net losses on prime deals were 0.40% in February, down 4.8% from 0.42% in January. However this level represented a 5.3% increase from February 2012.
Prime cumulative net losses were unchanged at 0.29% in February versus January, the fourth consecutive time the rate stayed at this level.
Meanwhile, late pays on subprime auto loans in ABS deals fell to 3.65% in February from 3.74% in January. Subprime annualized net losses fell to 5.53% from 6.62% in January and were down 17% on the year. It was the first year-on-year improvement since October 2012.
Fitch said delinquencies and losses are likely to fall further in March as tax refunds roll in and consumers pay down debt.
“The low loss frequency is in large part due to the stable U.S. economy. This is evidenced in stronger home values, rising equity prices, rising consumer sentiment and an expanding job market which saw slightly higher job growth in recent months,” the rating agency said in a press release.
“Further, healthy used vehicle values are containing loss severity resulting in elevated recovery rates on defaulted and repossessed vehicles.”
The Manheim Used Vehicle Value Index, which tracks used vehicle values, declined in February to 122.0 from 123.4 in January.
Fitch’s auto ABS indices is comprised of $67.7 billion of outstanding notes issued from 124 prime and subprime transactions. Of this amount, 73% comprise prime auto loan ABS and the remaining 27% subprime ABS.