Ripple Effect: VW Diesel Scandal May Hurt ABS, Analysts Say | Auto Finance News | Auto Finance News

Ripple Effect: VW Diesel Scandal May Hurt ABS, Analysts Say

© Can Stock Photo Inc. / trancedrumerVolkswagen Credit dealer floorplan securitizations will likely suffer higher-than-expected losses, in the wake of Volkswagen’s admission of cheating in diesel emissions tests in the U.S. and Germany, according to a recent research report from Moody’s Investor Services.

Per an Environmental Protection Agency mandate, VW has stopped sales of new and used vehicles equipped with the affected diesel engines, and will be forced to recall what could amount to 500,000 vehicles from model years 2009 to 2015 in the United States.

According to published reports, the manufacturer will offer floorplan financing reimbursement for grounded diesel vehicles on dealer lots.

In a similar report, which was also released last week, Fitch Ratings said the scandal may be felt in ABS transactions primarily through its impact on used-car values.

“Auto ABS transactions are exposed to used-car values either directly through residual value or indirectly via recovery proceeds from the sale of the car when a borrower or lessee defaults,” according to Fitch.

However, the price impact should be limited to the affected vehicles, Fitch added — unless VW’s wider brand reputation is damaged.


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