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Fitch Sees U.S. Auto ABS Losses Move Higher with Further Weakness Expected
According to New York-based Fitch Ratings, the U.S. automotive lending market has yet to see the light at the end of the economic tunnel.
NEW YORK — Fitch Ratings’ prime and subprime U.S. auto asset-backed security (ABS) performance indexes produced higher delinquency and annualized net losses (ANL) in July. Fitch expects loss rates to increase further during the fall, which is historically the weakest period of the year.
In July, annualized net losses on prime auto asset-backed securities hit the highest level for the year at 1.42%, increasing 15% over June’s level. ANL in July were 94% higher than in July 2007. The last time ANL were at this level was in late 2003/early 2004. Prime delinquencies rose to 0.71%, 14.5% higher than in June, and 37% higher than in July 2007.
In the subprime sector, annualized net losses were at 6.56% in July, a 16.5% increase over June, and 45% above a year earlier. Subprime delinquencies rose 11% in July to 3.63%. Delinquencies were 30% higher in July versus the same period in 2007.
While the wholesale vehicle market did show signs of stabilization in July, Fitch remains unconvinced that the market will improve structurally in the short term. The wholesale vehicle market remains soft with considerable weakness in the truck and sports utility segments, along with lower recovery rates in the luxury vehicle space. Additionally, current economic conditions combined with poor consumer demographics will continue to constrain the used vehicle market.
Fitch’s indexes track the performance of $65.2 billion of auto ABS, of which 69% comprises prime auto ABS and the remaining 31% subprime auto ABS.
Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, www.fitchratings.com.