Fitch: April Marks 'Stellar' Month for U.S. Auto ABS

June 06, 2012

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NEW YORK — Fitch Ratings called U.S. auto loan ABS performance in April "stellar" as its latest index results showed several record readings.

Analysts determined prime auto asset-backed securities (ABS) delinquencies and losses dropped in April to the lowest levels recorded in 2012. They said performance was buoyed by the solid 2009-2011 vintages, which are recording record low loss rates to date.

Fitch noted more than 50 transactions from the poor performing 2006-2008 vintages paid off in the past four to six months. Fitch's indices also reflect the strong 2009-2011 vintage deals.

"Additionally, April is typically the strongest month of the year thanks in part to tax refunds. These combined factors drove performance in April, as prime annualized net losses (ANL) hit a new record low," analysts explained.

Fitch pointed out prime 60-day delinquencies dropped 5.7 percent in April from March to 0.33 percent. The firm added ANL slid 50 percent month-over-month to 0.17 percent, a new record low.

Analysts went on to mention prime auto loan ABS cumulative net losses (CNL) declined 6.8 percent to 0.41 percent in April from March, and were 43.8 percent lower year-over-year.

"Wholesale vehicle values were strong in April although used vehicle values came off their peak March levels," Fitch stated.

The firm reiterated the Manheim Used Vehicle Value Index was at 126.1 in April, just below the 126.2 March level. Fitch added recovery rates in auto loan ABS transactions are at historic highs in 2012, "containing loss severity and keeping a lid on loss rates."

Analysts highlighted performance in the subprime sector exhibited similarly positive movement in April.

Fitch found ANL declined 11.7 percent month-over-month to 4.16 percent. The firm mentioned 60-day delinquencies also dropped to 2.33 percent in April, 9 percent lower month-over-month versus March.

Analysts acknowledged subprime auto delinquencies remain 35 percent higher than April of last year.

"Fitch's 2012 outlook for prime asset performance is stable, while the outlook for prime ratings performance is positive," analysts projected.

Fitch's auto ABS indices comprise of $56.79 billion of outstanding notes issued from 114 transactions. Of this amount, 79 percent comprise prime auto loan ABS and the remaining 21 percent subprime ABS.

Additional information is available at www.fitchratings.com.