The performance landscape for U.S. dealer floorplan ABS is likely to improve for the already resilient  asset class, according to Fitch Ratings.

The  turnaround  for  dealers comes following several years of declining profitability  and  mounting  pressures.  "Dealer floorplan transactions were  already  exhibiting  resiliency  to  the  recent credit crisis and financial  strain  over the last two years," said senior director Hylton Heard. "Recently  improved  auto  sales  and subsiding dealer costs are likely to further stabilize performance trends."

Fitch’s outlook for dealer floorplan ABS ratings through 2010 remains stable.

Overall performance metrics of dealer floorplan ABS have strengthened in 2010, including higher monthly payments rates, increased purchase  rates,  lower levels of delinquencies and fewer dealer defaults and overall loss levels.
 

But challenges remain ahead, particularly the current state of the U.S. economy and slow recovery; the current low level of auto sales compared to historical levels; the intense competitive environment; and the ongoing  dealer  pressures  such  as  access  to credit, expenses, and profitability.

Fitch said that further,  weakness  in  other non auto-related sectors, including marine and  recreational  vehicles,  pose  problems  for both manufacturers and dealers tied to non-auto or diversified equipment dealer floorplan ABS.

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