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.