Subprime lending

Ratings analysts say the A1 through A3 tranches benefit from total hard credit enhancement of 43.00% of the deal's initial principal balance, which includes subordination and a non-declining reserve account of 1.00%.

The company is coming off of a recent period of performance improvements, with gains in net income, cash and cash equivalents.

In one of the deal's positive credit attributes, none of the underlying loans in the collateral have terms longer than 72 months. Such longer-term loans have historically performed worse than shorter-term loans.

As interest rates rise and delinquencies among borrowers with poor credit scores soar, investors are increasingly scrutinizing the riskiest slices of asset-backed securities sold by some subprime auto lenders. That's forced certain issuers to postpone deals or sweeten terms.

DriveTime's latest has initial hard credit enhancement that ranges from 55.70% for the class A notes to 15.40% for the class E notes, and the company just bumped up its warehouse commitment.

A vast majority of the collateral, a combined 82.73%, have terms of between 49-60 months (58.46%) and 61-72 months (24.27%), while a slight majority of the pool (51.66%) have no credit scores.

The subprime auto lender has a good track record, but there are concerns about used-car prices normalizing, according to KBRA.

Subprime borrowers whose credit scores have risen since they bought their cars are increasingly looking for a better deal. Credit unions and small banks are seizing the opportunity, often with the help of fintechs.

The Spanish bank’s U.S. holding company said it will pay a premium to purchase the publicly traded shares in Santander Consumer Holdings. The proposal is subject to the approval of the auto lender’s board of directors.

A pool of subprime auto loans, new and used, and approved with a heavily automated, technology driven and multi-step process underpin a $559 million deal.