Fitch: Strong Spring Halts Climb in U.S. Subprime Auto ABS Losses
Notably, subprime annualized losses posted two consecutive months of lower losses in March, this after nine months of rising losses.
In the prime sector, 60+ days delinquencies dropped 28% month-over-month (MOM) through March to 0.33%. This rate was just 6.5% above the level recorded a year earlier, and fourth lowest ever on record. Prime annualized net losses (ANL) declined to 0.40% in March, 23% lower than in February. This level was still well above the loss rate recorded in March 2014 by 29%, as losses have climbed up from their record low levels over the past twelve months as asset performance slowed marginally.
Subprime asset performance recorded solid gains in March, as 60+ days delinquencies improved to 3.56% through March, 23% lower than in February but still 27% above March 2014. Subprime ANL also posted solid improvement last month dropping 9% to 6.58%. However, the loss rate was 33% higher than a year earlier. The sector continues to feel pressure from weaker collateral characteristics, combined with marginally lower used vehicle values relative to a year ago.
Low gas prices and improving unemployment conditions are supporting asset performance in 2015. The steep declines in gas prices over the past six to eight months, have helped consumers pare household costs and pay down other debts, including their auto loans.
Used vehicle values saw marginal pressure in March and crept 0.5% lower MOM, according to Manheim Consulting. The Manheim Used Vehicle Value Index was at 124.5 in March, down from 125.1 in February and was virtually unchanged from a year earlier.
Solid demand for both new and used vehicles - particularly late-model used vehicles, stable inventories and incentives, and low interest rates all continue to support used vehicles in early spring. Despite this, Fitch expects used vehicle values to decline further in 2015 due to rising off-lease and trade-in volumes which will place pressure on demand and ultimately values.
Fitch continued taking positive ratings actions on outstanding ratings in March, and has upgraded 13 outstanding subordinate note classes through the first three months of 2015, versus 18 during the same period in 2014. Fitch's outlook for prime asset performance is stable, while the outlook for ratings remains positive.
Fitch's indices track the performance of \$85.1 billion of outstanding auto loan ABS, of which 62% is backed by prime collateral and 38% by subprime collateral.
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