DALLAS — S&P Global Ratings sees little historical evidence of distress in the auto securitization market and is projecting modest growth this year, despite a slew of recent headlines claiming that “the sky is falling” in subprime auto, said Amy Martin, the ratings agency’s lead analyst for auto ABS.
S&P Global estimates the industry will generate $70 billion in retail auto loan asset-backed securities this year, up from $67 billion last year, she said.
“Generally when auto sales rise, auto ABS increases as well,” she said during a presentation at the Nonprime Auto Financing Conference last week. “However, we’re not expecting auto loan ABS to increase to those peak levels [of 2002 and 2005] as before, despite record auto sales.”
In subprime specifically, issuances were down slightly last year to $23.1 billion versus $23.3 billion the year prior. Reduced issuances from Santander Consumer USA and Exeter Finance Corp. were offset by increases from AmeriCredit/General Motors Financial Co., Flagship Credit Acceptance LLC, and a number of smaller issuers, such as Honor Financial, Sierra Auto Finance, and OneMain Financial.
Subprime auto loan originations — although they have been on the rise — were down 5% last year and remain short of pre-crisis peaks, she added. In 2005 and 2006, subprime auto loan originations totaled $135 billion whereas 2016 topped out at $119 billion.
Despite that volume, “only 20% of subprime loans are securitized,” Martin said as further evidence that the sky is not falling.
“Some like to point to the growth we’ve seen since 2009 and how the growth is off the charts,” Martin said. “They fail to take a historical view.”