Kroll Bond Rating Agency is starting to see signs of a reversal in the multi-year rise in securitized auto loan loss rates, according to the company’s December auto index report.
Ordinarily, loss rates are at their highest from November to January due to the rise in spending pressure during the holiday season, according to the report. This typically reverses course from February through May as borrowers receive tax refunds, which provide an additional source of income to pay for auto loans.
However, according to data found by Kroll, auto loan loss rates have declined in November and December of 2017 compared to the same time the previous year.
Annualized net losses in Kroll’s prime index fell 3 basis points year over year to 0.84%, while delinquencies fell 4 basis points to 0.56%. The rating agency’s non-prime index improved more dramatically, with annualized net losses falling 57 basis points to 8.7%. This decline in nonprime net
losses was led by improved performance from Exeter, AmeriCredit, and Santander. However, nonprime delinquencies rose 3 basis points to 4.97% year-over-year.
Hurricane relief programs — which were put in place to help ease the burden of consumers affected by hurricanes that hit Texas and Florida last year — may be playing a part in the improved performance. But, Kroll predicts that collections practices have begun to normalize in those regions and the improved performance has more to do with tighter lending put in place over the past two years by many auto loan ABS issuers.
