What's getting more scarce in CarMax prime ABS pools? Cars

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Maybe soon it will be TruckMax?

In the first 2019 prime auto-loan securitization for CarMax Superstores, the percentage of used-car loans tied to passenger sedans has declined to the lowest-ever level.

According to presale reports for the $1.2 billion-$1.4 billion CarMax Auto Owner Trust (CAOT) 2019-1, the 45.8% concentration of cars is down from 46.4% from the prior $1.5 billion CAOT 2018-4 deal issued last October.

While cars still represent the highest proportion of collateral, sport utility vehicles make up 40.8% of the pool and the largest model concentration belongs to the Ford F-150 pickup truck.

This is driven by stronger sales of trucks and SUVs lately, and part of an increasingly common trend across retail auto loan and lease pools industrywide.

CarMax’s increased dependence on trucks and SUV sales is having no impact on the credit quality of the transaction, with many pool characteristics, such as the weighted average FICO (706), loan-to-value ratios (94.9%) and loan seasoning (4.6 months) largely unchanged from the four CAOT transaction last year that totaled $5.6 billion.

The credit metrics are similar between the proposed $1.2 billion pool (covering 73,254 loans) and a potential upsized pool of $1.5 billion across 91,421 loans.

Both proposed pools feature seven classes of notes including four senior note tranches and three subordinate note offerings.

A tranche of $221 million (or $277 million if upsized) Class A-1 money-market notes have preliminary short-term ratings of F1+ by Fitch and A-1+ by S&P.

The triple A tranches include an A-2 tranche due 2022 to be split between fixed- and floating-rate notes and sized at either $410 million or $512 million; a tranche of $395 million (or $493.9 million) Class A-3 notes due 2024; and a Class A-4 notes tranche maturing in4 2024 totaling $86.7 million or $107.9 million.

All the senior notes are supported by 7.9% credit enhancement, up slightly from 7.85% in CAOT 2018-4 but below three other CAOT deals in 2018.

Expected net losses are unchanged from CarMax’s 2018-4 transaction. Fitch maintains a 2.4% cumulative net loss proxy, while S&P leaves its expected net loss of 2.2%-2.3% unchanged.

Delinquencies are up to 3.44% on the $12.2 billion managed portfolio as of Nov. 30, compared to 3.24% and 3.2% in 2017 and 2016 at the same dates. But annualized net losses were down slightly to 0.98%, down from 1% in 2017.

Recoveries on defaulted loans have weakened in CarMax’s portfolio, but improved slightly to 49.5% as of Nov. 30, slightly higher than the year before.

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