NEW YORK — Fitch Ratings reported this week that losses on
both prime and subprime U.S. auto ABS rose in July following lows seen earlier
in the spring.

Despite the increase, analysts indicated used-vehicle values
have stayed strong in the past two months.

"Additionally, overall asset performance remains strong
heading into the softer fall months thanks to the healthy wholesale vehicle
market and slowly improving economic factors. That said, some leveling off of
performance is in store," Fitch said.

"Auto ABS losses are likely to increase as the seasonally
weak fall progresses. Dealers will begin discounting existing 2013 models to
make way for new 2014 models, which typically impacts loss severity and drives
loss rates higher," analysts went on to say.

In the prime sector, Fitch determined 60-day delinquencies
rose 10 percent month-over-month to 0.33 percent in July. However, the firm
pointed out delinquencies are still 13 percent lower compared to July of last
year.

Analysts noted that prime annualized net losses came in at
0.31 percent in July, up from 0.21 percent in June.

"Even with the larger than normal increase, loss rates are
still very low historically and in line with July 2012," they said.

Meanwhile, Fitch highlighted prime cumulative net losses
settled at a record low in July at 0.27 percent, falling 25 percent lower
year-over-year.

"The improving economy and housing market, along with
increased construction, has led to rising new and used-vehicle sales (trucks,
in particular) and solid demand for automobiles supporting asset values," Fitch
said.

The firm recapped that the Manheim Used Vehicle Value Index
moved higher in July, marking an increase for the second consecutive month. The
latest reading stood at 120.9, representing a 1-percent uptick from 119.7 in
June.

Last month's mark is the third highest level recorded in
July since 1995. The highest was 125.9 in July 2011.

Turning attention to subprime, Fitch reported that 60-day
delinquencies in the subprime space jumped to 3.13 percent in July from 2.90
percent in June. This movement represents an almost 8 percent spike
month-over-month, but the level is virtually unchanged year-over-year.

Analysts mentioned subprime annualized net losses increased
to 4.45 percent in July, up 17 percent versus June but 6 percent better
year-over-year.

"The outlook for asset performance is stable in 2013 while the
rating outlook is positive," analysts said. "Fitch upgraded 19 outstanding classes
of prime auto ABS notes in 2013 year-to-date, compared to 23 upgrades issued in
2012 during the same period.

Fitch's prime and subprime auto ABS indices are comprised of
$67.7 billion of outstanding notes issued from 125 outstanding transactions. Of
this amount, 69 percent comprise prime auto loan ABS and the remaining 31
percent subprime ABS.

Continue the conversation with SubPrime Auto Finance News on LinkedIn and Twitter.


Normal
0
false
false
false
EN-US
X-NONE
X-NONE

/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-qformat:yes;
mso-style-parent:””;
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin-top:0in;
mso-para-margin-right:0in;
mso-para-margin-bottom:10.0pt;
mso-para-margin-left:0in;
line-height:115%;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:”Calibri”,”sans-serif”;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-fareast-font-family:”Times New Roman”;
mso-fareast-theme-font:minor-fareast;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;}