Auto ABS issuance volume is 11.5% below where volume was in 2015, according to John Bella, ABS managing director at Fitch Ratings, but is still expected to reach a yearend total similar to last year — about $102 billion.
There’s a “loose correlation” between auto sales and ABS volume, and with the SAAR predicted to hit 17.5 million by yearend, slightly higher than last year’s 17.4 million, issuance volume is expected to fall in line with the previous year’s as well, Bella said during the latest installment of Fitch’s Virtual Investor Series.
The industry is seeing a combination of slowing sales and increased competition leading 72-month and 84-month loan terms to become ‘the norm,’ Bella said.
“Our expectation is that competition among lenders, particularly in the subprime space will continue to intensify over the coming year,” he said. “With wholesale markets also expected to weaken, this will inevitably lead to a decline in ABS performance metrics.”
In the face of slowing sales, manufacturers are exhibiting signs of “good industry discipline, Stephen Brown, senior director, U.S. Corporates at Fitch said.
“We’ve seen some encouraging signs of that over the last year or so, with some of the manufacturers pulling back on production of slower selling vehicles, while they are adding capacity to produce some of the hotter selling vehicles,” Brown said. However, “all it takes is one rogue manufacturer to come in and start going after marketshare, offering a lot of incentives. That can be a real issue.”
Check out the video below for more from Fitch’s Bella and Brown:
