Despite the rise in used vehicle values for the seventh straight month in July, this did not stop prime losses from rising to 20% above the 2008 level, Fitch Ratings said in a report.
The used vehicle values are up above 7% in the past year through July. This has benefited auto ABS performance by constraining loss severity levels. The used vehicle values have showed gains for the majority of vehicle segments in almost every month this year, Fitch said. Neverthe less, the rating agency expects loss levels to rise in the latter half of 2009, which is actually consistent with historic patterns in this time of the year.
According to the rating agency, the loss frequency remains the biggest driver of loss rates on auto ABS this year.
"Unemployment remains historically high and job creation is stalled," said Fitch Senior Director Hylton Heard. "Consumers are still struggling to keep up with their monthly auto loan payments as personal bankruptcies remain at or near record levels."
Fitch’s prime 60+ day delinquency index was at 0.77% in July, which is 8.5% higher on a monthly basis. This was the fourth straight monthly rise in the index. The annualized net losses (ANL) increased by 3% to 1.74% in July over June, and are still 23% higher compared with June 2008.
Despite 2009's declining asset performance, prime ‘AAA’ auto ABS ratings performance is still stable, Fitch said. The rating agency has issued eight upgrades on prime auto ABS in 2009, vs. 14 during the same period in 2008. Negative rating actions have been minimal in 2009, with just three downgrades.
In the subprime sector, 60+ days delinquencies jumped to 4.26% in July, a 10.6% rise over June. Subprime ANL were at 7.06% in July, which is 6.2% above June.
According to Fitch, $55.5 billion worth of prime and subprime auto ABS compose Fitch’s indexes.
The prime auto ABS index total nearly 70 deals, while the subprime index comprises over 30.
