General Motors

The coming Fitch-rated deal has higher FICO scores than competitors' pools, but the auto sector faces headwinds.

A continuing macroeconomic recovery fueled by the federal government's stimulus payments to consumers has benefited GMF as well.

The share of 72-84 month loans is 15.56% in GMF's 2021-1 transaction, up from 12.24% in its prior prime-auto issuance.

The automaker is reportedly planning to apply for a bank charter so it could collect deposits and grow its own auto-finance business. That could create more competition for Ally, which was spun off from GM in 2006 but remains a key lending partner.

Some corporations are willing to oblige, turning instead to new, pricier term loans or revolving credit lines rather than tapping existing ones, industry officials say.

GMF’s $1.269.9 billion asset-backed transaction will be secured by a pool of loans that has a slightly lower weighted average FICO, higher collective LTV and longer average terms compared to prior deals issued via GMF’s securitization platform.

The captive lender is already underwriting and managing leases for GM electric cars in China; it is also buying and managing fleets for GM’s Maven ride-sharing program launched in the U.S. in 2016.

The collateral for GMCAR Trust 2019-1 features a higher weighted average borrower FICO than any prior GM Financial deal; it also sports a lower projected cumulative net losses from Fitch Ratings.

As more new-vehicle buyers flock to General Motors' high-ticket trucks and SUVs, GM Financial has to supply riskier 60-plus month loans to finance them. That's prompting higher net ABS loss projections from Fitch.

The average FICO for the pool of lease obligors is at a peak level for GM Financial's shelf, but Fitch expects higher losses on resale values on a pool more heavily dependent on longer-term leases and luxury models.

That's only half as large as the lender's four previous deals, which ranged from $1.02 billion and $1.12 billion; company executives recently touted a shift toward more financing from deposits.

The captive finance arm of General Motors has been pulling back on leasing, but it still expects to be negatively impacted by falling used car prices for the remainder of the year.

Average FICOs are declining in both lenders' pools, and Nissan Motor Acceptance Corp. is including more borrowers with sub-700 scores in its prime portfolio than in three prior auto-loan securitizations.

GMF's second deal of the year comes as monthly payment rates on dealer financing is declining and more dealers are relegated to its higher-risk credit tiers.