This week, KBRA released news research examining the increasingly asymmetric performance of auto loan ABS across borrower credit profiles.

Perhaps also seen by finance company executives who oversee collections and portfolio health, KBRA pointed out that stronger borrowers have remained “comparatively resilient, while borrowers with weaker credit profiles and higher payment burdens have accounted for a disproportionate share of delinquencies and losses.”

Analysts explained that pool-level averages such as weighted average credit score and weighted average payment-to-income remain useful first-level indicators of a securitized pool’s credit quality.

“But they can obscure risk concentrations within borrower subgroups,” KBRA said in a news release. “As a result, the more revealing question is not only what the average borrower looks like, but how much of the pool is exposed to borrower pockets that have experienced the greatest performance deterioration.”

With those points in play, KBRA generated a report that included these three primary takeaways:

  1. Auto loan ABS performance has become increasingly asymmetric

Since 2022, KBRA indicated 60-day delinquencies and annualized net losses have increased across borrower segments, but deterioration was far more pronounced among mixed, stretched, and stressed borrowers than among resilient and stable borrowers.

  1. High-risk borrowers carry a disproportionate share of credit stress

This year, KBRA found that mixed, stretched, and stressed borrowers represented 37.4% of outstanding loan amounts but accounted for 81.5% of 60-day delinquency burden and 80.5% of the burden for annualized net losses.

  1. Pool-level averages remain important, but distributional measures provide important additional context

KBRA added that the share of borrowers in higher risk factor segments can help identify where risk is concentrated within a pool.

The entire report is available to KBRA subscribers via this website.