Auto Loan ABS Sitting Pretty

02
Apr

The Fitch Ratings company is seeing lots of positive signs coming out of the auto loan industry these days. Specifically, in its latest collection of data, Fitch has found improvement in car loan delinquencies and defaults and in used car values, which both lead to better performance of auto loan asset-backed securities (ABS).

Both prime and subprime auto loans showed some progress in February. Among primes loans, the annualized net losses (ANL) fell by 3.2 percent from January to 0.90 percent. February’s ANL were also down 42 percent from the year before. Subprime ANL were down 13.7 percent from the previous month to 5.94 percent, and were 35 percent lower than February 2010’s figure.

For car loans that were 60 days or more behind, the prime loan percentage did increase by 5 percent, but was still down over 24 percent on a yearly basis. The number of subprime loans that were delinquent by 60 or more days fell 7 percent to 3.24 percent in January, and dropped almost 30 percent over the year before.

“Late winter/early spring has shown to be a consistently strong period for auto loan ABS,” said Fitch Ratings Director Brian Vorderbrueggen in a press release. “Tax refunds, annual bonuses and salary increases will enable many consumers to make their auto loan payments, translating to lower loss and default rates for auto ABS.”

Fitch also found that used vehicles are continuing to hold their value really well. Especially as gas prices have soared in the wake of the African and Middle East conflicts, the value of smaller, fuel efficient vehicles has remained strong.

“Due to improved industry fundamentals, the used vehicle market is better-positioned to manage the impact of higher gas prices than in 2008, when gas rose above $4.00 a gallon,” said Vorderbrueggen. “As a result, the rate of auto ABS loss severities will be lower than three years ago.”

Overall Fitch has a “stable outlook for asset performance for 2011.”

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