GM Financial started off the new year with the first auto ABS deal across the industry, and the securitization at $1.3 billion of prime loans is also the captive’s first public deal in the Consumer Auto Receivables shelf.
Overall the Consumer Automobile Receivables pool is the fourth securitization of prime quality retail installment auto loan contracts originated or acquired by GMF, and this pool represents 85% new vehicles and 15% used, according to a pre-sale report from Moody’s Investor Services.
The credit quality of the pool has a higher weighted average Fico of 772 compared with the 2017-3, 2017-2, and 2017-1 pools, which had average credit scores of 771, 763 and 769, respectively.
“The weighted average Fico of 772 is at the higher end of the Fico range of the pools [other] captive finance companies have securitized recently,” the report said.
The weighted average original term of 66 months is one month lower than the company’s 2017 issuances, which is possibly a sign that the lender is bucking the trend of increasing loan terms seen across the industry.
The Federal Reserve released consumer credit report G19 yesterday, showing that in 3Q17, $4.42 billion in auto loans were made for 48-month loans. Lenders securitized $4.36 billion of 60-month loans in that same period. A year over year comparison shows that ABS outstandings are down 5.3% for 48-month loans, and up 2.8% for 60-month loans.
GM Financial may be concerned with the residual values coming back on those long-term loans given the increasing decline of used-vehicle values, Moody’s noted.
“The recent trend of declining used car prices can expose the transaction to a lower recovery rate and higher loss severity, and consequently a higher net loss,” the report said