Auto ABS losses continue a “steady climb,” Fitch Ratings said in its most recent Auto ABS index report released yesterday.
Some lenders have tried to curb declining asset performance by improving underwriting Fitch noted, and as a result, a number of auto ABS securitizations came to market last quarter with marginally better credit quality, including stable or marginally improved FICO scores.
For example, Ally Financial Inc. has trended more toward prime borrowers, according to the company’s third quarter earnings, and Consumer Portfolio Services have been open about preparing for a recession.
However, “only time will tell how long this trend will last and despite the pushback by some lenders, Fitch does not believe that these changes will have a significant positive influence on asset performance,” the company wrote in the report.
Losses overall have climbed in each of the past three months, the agency reports.
Prime 60+ day delinquencies crept higher to 0.44% in September and were 11.5% higher than at the same time a year prior. Prime ANL rates — at 0.70% in September — grew to their highest level since 2011 compared with 0.53% at the same time a year prior, according to Fitch.
On the other end of the credit spectrum, subprime delinquencies rose to 5.05% in September, the second highest level since 2001, and 13.2% higher than a year earlier. Subprime ANL rates rose above 9% for the second time this year, hitting 9.29% — a 4.6% month over month increase from 8.9% in August. Year over year, that increase is 23% compared to last year’s 7.54% rate, the rating agency wrote.
Despite weakening credit performance, Fitch says these outstanding ABS transactions are tracking in accordance with initial forecasts for the year.
These trends are expected to continue, however, as the fourth quarter is historically experiences the largest depreciation in vehicle values, Anil Goyal of Black Book told Fitch in the release. This is already panning out in early data from the first two weeks of October, which saw the largest year-to-date weekly decline in car values, Goyal said.
