From the April issue: The auto securitization market is being injected with new blood.
It’s been about 15 years since an auto financier securitized a new asset class, but Fair is gearing up to do just that. Fair, a used-car leasing platform with a subscription-based model, has started the process of getting a rating and establishing its first asset-backed securitization, which will likely hit the market in early 2020, President and Co-Founder Georg Bauer told Auto Finance News.
Meanwhile, digital, used-vehicle retailer and financier Carvana completed a $338.8 million securitization last month. And DriveItAway, which connects dealers with ride-hail drivers in need of subscription car services, is also eyeing a securitization. “I can see it, but we’re far away from it right now,” said Chief Executive John Possumato.
Despite potential credit challenges for first-time issuers, newer business models will likely garner investor interest. “[Investors] are looking for things that disrupt large existing industries, and auto finance and auto sales are a very big industry,” said an auto equity research analyst. “It’s very entrenched in the dealer model, and people are looking for things to disrupt it.”
Carvana’s direct-only lending model sets it apart from other auto securitizers and may make it the “first online-only auto lender to tap the ABS market,” said Nicky Dang, Moody’s Analytics senior vice president of the consumer ABS new ratings team. “They sell their cars, they’re financing their cars at the same time,” she said. “From that perspective it’s unique, because we don’t have many direct auto lenders in that space.”
In fact, Bauer contends that the auto finance sector is in the midst of “the largest transformation ever in its 130-year history.” Aside from autonomous and electric vehicles, the industry faces a “whole new way of getting or providing consumers with access to mobility like never before,” he said.
“It’s a natural progression, and it’s exciting to pave the road,” Bauer added.