The Kroll Bond Rating Agency (KBRA) released its 2020 forecast for the automotive asset-backed securities, mentioning how a new participant might generate more activity in this arena.
Analysts said in their report shared with SubPrime Auto Finance News this week that they expect auto-related ABS volumes to remain mostly flat next year, coming in at $125 billion.
KBRA explained its forecast is based on the thinking that U.S. new vehicle sales peaked in 2017 and will likely continue to gradually decline in 2020, which should weigh on prime auto loan, auto lease, and dealer floorplan ABS volumes.
“Offsetting the modest decline in auto sales is the rise in the percentage of auto loans being funded through the securitization,” analysts said. “In 2017, around 9% of outstanding auto loans were funded through the ABS market, but this percentage has risen to over 10% in 2019.”
Another development that impacted KBRA’s ABS expectations for 2020 arrived in November. That’s when the firm said GTE Federal Credit Union priced the first auto loan securitizations ever issued by a credit union.
“Although the deal was just $175 million, if other credit unions begin to tap the ABS market for funding rather than rely on their deposit base, this could be a source of growth in the asset class,” analysts said.
KBRA pointed out that year-over-year growth in auto-related ABS supply has been fueled by a substantial amount of auto lease deals coming to market. That segment constituted $20.9 billion through November, representing a lift of 39% year-over-year.
In contrast, analysts reiterated auto loan volumes appear to be finally leveling off as new vehicle sales have plateaued. Overall auto loan supply is up just 4.1% year-over-year, with prime auto loan volumes up 13.4% and non-prime volumes down 9.4%.
KBRA added that other auto-related ABS sectors — rental car, fleet lease and dealer floorplan ABS — watched their volumes grow to $19.4 billion, which marked a 4.4% rise year-over-year.