With outstanding auto loan balances reaching a record $1.1 trillion as of June 30 and concern growing about the sector’s health, S&P Global Ratings recently analyzed the resiliency of auto loan asset-backed securities (ABS) ratings through the Great Recession of 2007-2009.

Analysts found their ratings on the 2006-2008 vintage transactions “held up well” as the economy progressed through the recession and the following weak recovery, with only six amortizing auto loan ABS transactions out of 180 downgraded for poor performance and no defaults.

In this analysis, S&P Global Ratings explained that the agency back-tested the 2006-2008 vintage transactions to compare its initial 'BBB' stressed cumulative net loss predictions with actual realized losses.

“We found that these loss expectations generally exceeded the actual level of losses,” analysts said. “Ratings stability for these deals during this time period can be attributed to the transactions' strong structural features, such as non-amortizing subordination and floors to the reserve and overcollateralization amounts.

"However, our study also indicates that it was promoted by our rating approach to determining our 'BBB' stressed loss forecasts,” analysts went on to say.

To purchase the entire study, search for “Back-Testing U.S. ABS Auto Loan Performance” at www.globalcreditportal.com.