Auto Securitizations Become ‘Less Important,’ Moody’s Says

While Moody’s Investors Service indicated that auto securitizations are becoming “less important,” a separate report from S&P Global indicates that the sector is stable.

“Of the approximately $1.1 trillion in outstanding auto loans, 14% are financed through securitizations,” according to a report from Moody’ released Tuesday. That is less than the approximately 20% funded through the asset-backed market before the financial crisis, indicating securitizations are not as popular of a funding source as they used to be.

“The proportion dropped after the crisis as a result of the retraction of the securitization market, and the persistent low-interest rate environment, which made other funding sources more attractive,” the report states.

But an S&P Global webcast and presentation published last week reports that a zero to 5% growth in the ABS market is expected. “Given our forecast for lower U.S. auto sales of 17 million units, we’re expecting auto loan ABS volume to range between last year’s level of $66.5 billion and $70 billion.” Additionally, S&P’s presentation indicated that auto loan ABS represented approximately 23% of auto loan originations in 2007, declined to a low of 16% in 2010, and has since stabilized at approximately 18%.

S&P also expects subprime ABS — which totaled $23.1 billion last year and represented 35% of total auto loan ABS — to be stable to slightly higher for 2017.

Moody’s maintains in its report that the importance of ABS market access differs based on the loan originator. “Securitization funding is critical to finance companies, bank originators rely on the securitization least, and captive lenders finance 20% to 40% of their loans through ABS,” the report said.

Moody’s did not respond to a request for comment by press time.