Auto ABS nonprime losses rise 197 bps YoY

Credit performance across securitized prime and nonprime auto loan pools weakened further in June in line with seasonality. The rate of 60-plus day delinquencies across prime auto loans sat at 0.39%, up 1 basis point (bps) month over month and 14 bps year over year, according to Kroll Bond Rating Agency ’s June auto loan ABS index, which measures performance during the May collection period on all U.S. publicly rated securitized auto loan collateral pools. Annualized net losses across prime securitized auto loans ticked down 6 bps sequentially but rose 14 bps YoY to 0.26%. [caption id="attachment_58331590" align="aligncenter" width="523"] Source: KBRA [/caption] Nonprime loans 60-plus days delinquent increased 46 bps MoM and 61 bps YoY to 5.17%, while annualized net losses rose to 5.88%, up 2 bps sequentially and 197 bps YoY. [caption id="attachment_58331587" align="aligncenter" width="528"] Source: KBRA [/caption] Auto ABS “underlying consumer performance is deteriorating, and the seasonal improvement that was seen in the first three, four months of the year has reversed,” Eugene Belostotsky , ABS analyst at Citigroup , told Auto Finance News . “Structures have been upgraded to withstand the losses.” Recovery rates improved on a sequential basis across prime loans, but nonprime recoveries declined. Prime recoveries landed at 61.5%, up 5.4 percentage points MoM but down 5 percentage points YoY, according to KBRA. Recoveries across nonprime loans decreased 0.4 percentage points sequentially and 10 bps YoY to 49.9%, according to KBRA. [caption id="attachment_58331585" align="aligncenter" width="523"] Source: KBRA [/caption] Auto ABS loan performance is expected to continue worsening in the coming months, driven by seasonal consumer spending, inflationary pressures and the return of student loan payments, according to KBRA. Still, investor appetite remains strong for auto ABS deals , Belostotsky said. “Financing rates are higher, capital market rates are higher, but deals are performing as expected in the market,” he said. Auto Finance Summit, the premier industry event for auto lending and leasing, returns October 29-31 at the Bellagio Las Vegas. To learn more about the 2023 event and register, visit autofinance.live/afs/ .

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