Fitch Expects to Rate Honda Auto Receivables 2004-3 Owner Trust 'F1+/AAA'

NEW YORK--Oct. 21, 2004--Fitch Ratings expects to assign ratings to the receivables-backed class A notes issued today by Honda Auto Receivables 2004-3 Owner Trust as listed below:

-- $370,000,000 2.09250% class A-1 asset-backed notes 'F1+';

-- $420,000,000 2.48000% class A-2 asset-backed notes 'AAA';

-- $475,000,000 2.91000% class A-3 asset-backed notes 'AAA';

-- $246,505,000 3.28000% class A-4 asset-backed notes 'AAA'.

The trust also issued $50,774,257.07 in certificates that are retained by the seller and not rated. Fitch's preliminary ratings address the likelihood that the noteholders receive full payments of interest and principal in accordance with the terms of the transaction documents. The expected ratings on the class A notes are based on the high quality of the receivables originated and serviced by American Honda Finance Corporation (AHFC), the transaction's sound legal and cash flow structure, the yield supplement account (YSA), and the 3.75% initial credit enhancement provided by the subordinated certificates (3.25%) and a 0.50% nondeclining reserve fund of the initial pool, which will remain at that level until the reserve account exceeds the total balance of outstanding notes. The reduction in target reserve levels reflects the increase in expected excess spread in 2004-3 versus that of 2004-2.

Principal and interest on the notes is distributed monthly, commencing on Nov. 1, 20048, 2004. Principal is distributed on a modified pro rata basis, with the class A-1 notes receiving all principal collections until paid in full. Once the class A-1 notes are retired, principal is distributed sequentially among the remaining class A notes but pro rata with the certificates. The certificate interest and principal payments are subordinated to the note interest and principal payments, as well as payments to the reserve account.

The receivables include 103,811 automobile loans, with a total principal balance of $1.56 billion. The credit tier distribution and managed portfolio for 2004-3 differs from 2004-2's. The percentage of the highest credit tier loans remains very high but reflects a slight decrease from the level in 2004-2. Although the percentage of lower credit tier loans remains low, there is a slight increase from levels in 2004-2 and in managed portfolio levels for 'C' and 'B' credit tiers. Changes in the credit tier mix resulted in negative Fair, Isaac & Co., Inc. (FICO) migration for 2004-3, compared with the FICO scores for 2004-2.

The 2004-3 transaction contains 86% new vehicles, a large concentration that is expected to result in losses similar to those of previous pools. As in prior transactions, 2004-3 includes certified used cars that must meet American Honda Motor Co., Inc.'s program guidelines. These vehicles generally have limited mileage and are better conditioned than standard used cars. The credit scoring system employed by Honda considers certified used vehicles to be comparable to new vehicles. The 2004-3 transaction contains 4.57% of noncertified used vehicles, a substantial increase from 2004-2's 1.98%. This increase in noncertified vehicles potentially can incur additional losses, increasing the severity on the pool. The 2004-3 transaction has 9.43% of certified used vehicles, which is slightly less than 11.55% for 2004-2.

Business and credit stress scenarios were applied to the collateral to insure that the structure is sufficient to withstand 'AAA' scenarios. Under the available credit enhancement, the class A notes can sustain more than 5.0 times (x) Fitch's base case cumulative net loss estimate, which is consistent with an 'AAA' rating. Under the existing structure, 2004-2 is able to sustain more than 5.0% net losses without incurring shortfall of principal or interest on the class A notes.

HMC, AHFC's parent company, is Japan's third largest car manufacturer, a leading maker of motorcycles, motor vehicles, and power equipment and ranks among the world's top 10 manufacturers. Additionally, HMC enjoys an extremely competitive global position based on its capital and manufacturing efficiency and reputation for producing high quality products. In the month ended June 30, 2004, HMC's consolidated net income totaled $4.6 billion, up 23.2% from the prior year. 2004 Sales have totaled 78.2 million, up 15.9% over last year's.