Early results for the 2012 vintage subprime auto ABS transactions have shown that cumulative net loss rates in the sector are comparatively "well behaved," Wells Fargo analysts said.
While it might be too soon to make definite conclusions, overall the 2012 offerings are in line with 2010 and 2011 vintages, they said.
With normalizing auto credit conditions for borrowers, this implies that default rates can increase versus the post-crisis lows. Analysts stated that there has been much talk in the securitization industry regarding the potential for subprime auto lending to move beyond normal to an scenario where competitive pressures can result in credit becoming too easy.
A more significan concern, analysts said, would be a rise in default rates that would come together with a slowing economy or a renewed recession.
Used-car prices have peaked and are starting to decrease, analysts said. The dip in used-car prices since May might not have been fully reflected in cumulative net loss numbers, so analysts anticipate some upward pressure in the future.
Analysts also noted that gas prices remain significantly high, going back forth in the $3.50-$4.00/gallon range over most of the previous couple of years. They have been a drag on many households' finances. Inspite of these trends, analysts do not really think that the high gas prices will serve as a major problem for subprime auto ABS unless the macroeconomy continues in its weakness.
Analysts in the report looked at the individual trusts with pre-crisis transaction history: AMCAR, SDART, DTAOT, CPS, PART, and FIAOT.