Fitch Ratings asserted that U.S. auto lease ABS will continue to perform within expectations, and ratings will be stable even though analysts understand that used-vehicle values will continue to decline moderately from their recent “untenable” highs.

Fitch also projected that the robust loss protection in auto lease ABS (including continued realization of residual gains) will continue to support stable ratings, despite expected market pressure. Analysts noted securitized residual maturities have been higher in 2014 than any year since the last recession.

Furthermore, they mentioned March marked the highest level of securitized residual maturities ever recorded by the Fitch Index at over $525 million.

“We expect used-car values to further weaken as off-lease and fleet volumes rise and sales of new vehicles continue to be strong,” Fitch analysts said. “Today automakers reported that light vehicles sales rose by 6 percent in the past 12 months and that the seasonally adjusted annualized selling rate reached its highest level since January 2006.”

As the new-vehicle SAAR hit its highest level since 2006 this July, Fitch acknowledged vehicle trade-ins entering the secondary market increased.

“Additionally, incentive spending remains high. Cash, interest rate subvention and longer loan terms providing for lowered payments have fueled sales, making new-vehicle purchases more attractive,” analysts said.

Despite these trends, Fitch emphasized auto lease ABS is still generally producing residual value gains. Fitch's Auto Lease residual index gained 5.76 percent through July, down from gains of 8.38 percent in June and 12.02 percent a year ago.

Analysts noted July marked the fourth consecutive month of declining gains for the index, reflecting the recent softening in used-vehicle values.

Fitch also mentioned residual retention has been mixed among vehicle segments.

Luxury gains in the Fitch RV index declined dramatically in July to 2.77 percent, down from 17.08 percent a year ago.

“Notably, the car segment is experiencing pronounced price pressure, particularly within the luxury space,” analysts said. “Wholesale performance of larger vehicles has been much better, particularly for the pickup segment.”

Fitch cited Black Book analysis that indicated these trends are expected to continue for the remainder of the year.

“Fitch remains cautious and we expect residual values to decline further in the near term as dealers receive new models and discount older ones in the fall. Fitch expects that pressure to be evident in the coming months and securitized residual maturities coming off lease to remain high through 2015,” analysts said.

Despite some negative trends discussed, Fitch said its ratings performance is not expected to be impacted in 2014. Fitch has upgraded or affirmed all outstanding rated bonds since 2008, when a single class of notes was downgraded.

“Fitch's ratings assume volatile wholesale market disruptions when transaction credit enhancement grows rapidly and is capable of sustaining stresses well outside of anything historically seen — including well beyond the extraordinary value declines of 2008-2009,” analysts said.