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The end of 2012 brings continued strong performance for U.S. prime auto ABS while subprime loans again took a step back, as expected, according to the latest index results from Fitch Ratings.
Prime auto ABS produced the strongest year to date with losses dropping to record low levels, ranging from 0.14 percent to 0.53 percent. As Fitch predicted, subprime auto ABS performance has declined over the past six months, driven by the typical weak fall season going into late 2012.
Factors supporting performance in 2012 included the recovering U.S. economy albeit volatile, strong used vehicle values and high recovery rates, and strong collateral characteristics and solid performance of the 2009-2011 vintages to date.
November saw the Manheim Used Vehicle Value Index rising to 122.6 from 121.9 in October, as wholesale vehicle values was strong and values rose due to increased demand and tight inventories due to the effects of Hurricane Sandy. Although wholesale vehicle values came down from peak levels seen earlier in the year, they are holding strong going into 2013. Fitch expects used vehicle values to continue this trend in 2013 albeit at somewhat lower levels.
Prime 60-plus day delinquencies dropped to 0.36 percent in November from 0.37 percent in October. This represents a 21.7 percent improvement year-over-year (YOY). Prime cumulative net losses (CNL) also dipped in November, improving 3.3 percent month-over-month (MOM) and 48.2 percent lower than in November 2011. Prime annualized net losses (ANL) were 0.36 percent, slightly above October's level (0.34 percent) but were 32.1 percent stronger year-over-year.
Subprime 60-plus day delinquencies came down 5.4 percent in November to 3.53 percent. However, ANL rose to 6.72 percent, a 4.4 percent increase month-over-month and 0.5 percent rise year-over-year.
U.S. auto ABS issuance has been buoyant in 2012. Driving the strong issuance numbers are higher new and used auto sales this year, the expanding consumer credit market, availability of new improved vehicle models and the aging U.S. vehicle fleet.
Fitch's auto ABS indices comprise of $67.19 billion of outstanding notes issued from 121 transactions. Of this amount, 75 percent comprise prime auto loan ABS and the remaining 25 percent subprime ABS.
Fitch's outlook for prime auto ABS asset performance heading into 2013 is stable, while ratings performance outlook remains positive for prime auto loan ABS.