CHICAGO -

Fitch Ratings recently reported that normalizing underwriting terms for U.S. auto loans and leases contributed to a modest deterioration in asset quality metrics during the fourth quarter.

Still, firm analysts believe finance companies remain focused on emerging risks tied to expanded subprime lending and an expected weakening of credit quality trends this year.

Fitch determined typical seasonal variation in discretionary consumer spending patterns last quarter helped push up loan losses and delinquency rates as the volume of nonprime auto lending continued to grow.

Analysts found that the average net loss rate for lenders covered in Fitch’s most recent analysis rose to 1.01 percent in the fourth quarter, up 16 basis points from the third quarter and 3 basis points from the year-earlier period.

The firm noted average delinquency rates worsened more materially last quarter, rising to 3.89 percent, which is up 57 basis points sequentially and 34 basis points year-over-year.

Fitch calculated total nonprime auto ABS issuance increased 21 percent for all of 2013 to $21.6 billion.

“This figure still falls short of precrisis peaks, but reflects increased competition among banks, captives, credit unions and other finance companies for new business. In the process, loan spreads have fallen and terms have been extended,” analysts said.

“The strongest level of new vehicle sales since 2007 is supporting loan originations, and we expect 2014 new vehicle sales to rise to 16.0 million units from 15.5 million last year,” they continued.

“Rating outlooks for major auto lenders covered in our analysis remain largely stable,” analysts went on to say. “But our sector outlook is negative, reflecting more intense competitive pressure in the nonprime space, a further easing of underwriting terms, continued moderation in used-car values and moderate deterioration in asset quality.”