Auto ABS Volume Climbs 20% Bucking Expected Declines

Analysts at Kroll Bond Rating Agency Inc. were “surprised” to report increases in auto loan ABS issuances in June because they forecasted a contraction period, Brian Ford, the chartered financial analyst of structured finance research, told Auto Finance News.

The rating agency reported a 20% year-over-year increase in both prime and nonprime auto loan issuances, despite expectations volume would contract due to weak car sales, declining origination volumes, and deteriorating collateral performance, Ford said.

In the prime space, BMW Financial Services, VW Credit Inc., and GM Financial drove issuances. Subprime issuers stimulating securitization volume are Westlake Financial Services, Ally Financial Inc., and Santander Consumer USA. Though Santander typically serves as a main driver for securitizations in the subprime space, the lender’s issuances are consistent year over year.

“If you look at Santander as a whole and also take in their deep subprime shelf, issuance has been flat year over year,” Ford said. The year over year increases in Westlake and Ally’s issuances served as the “main drivers in the subprime space,” Ford said.

Additionally, “both prime and nonprime collateral performance is expected to worsen in July, as seasonal factors should push losses and delinquency rates higher each month through the remainder of the year,” the rating agency noted in its prime auto loan index.

Prime and nonprime issuers moving outside of their buybox drove an increase in net losses and delinquency rates, Rosemary Kelley, senior managing director and head of the consumer ABS group, told AFN. In June, annualized net losses in nonprime fell 44 basis points year over year to 6.43%, while 60-day delinquency rates increased 2 basis points year over year to 4.27%.