Fitch: U.S. Auto ABS Losses Tick Up Despite Stronger Used Vehicle Values

NEW YORK--Used vehicle values posted their seventh consecutive monthly increase in July, but this did not stop prime losses from moving higher to 20% above the level in 2008, according to Fitch Ratings.

Used vehicle values are up over 7% in the past year through July, which has benefited auto ABS performance by constraining loss severity levels. Used vehicle values have posted gains for the majority of vehicle segments in virtually every month in 2009. Nonetheless, Fitch expects loss levels to increase in the latter half of 2009, consistent with historic patterns during this time of the year.

Loss frequency remains the biggest driver of loss rates on auto ABS this year,' according to Senior Director Hylton Heard. 'Unemployment remains historically high and job creation is stalled,' said Heard. 'Consumers are still struggling to keep up with their monthly auto loan payments as personal bankruptcies remain at or near record levels.'

Fitch's prime 60+ days delinquency index was at 0.77% in July, 8.5% higher on a monthly basis. This was the fourth consecutive monthly increase in the index. Annualized net losses (ANL) rose by 3% to 1.74% in July over June, and remain 23% higher than in June 2008.

Despite declining asset performance in 2009, prime 'AAA' auto ABS ratings performance remains stable. Fitch has issued eight upgrades on prime auto ABS in 2009, vs. 14 during the same period in 2008. Negative rating actions have been minimal in 2009, with just three downgrades.

In the subprime sector, 60+ days delinquencies jumped to 4.26% in July, a 10.6% rise over June. Subprime ANL were at 7.06% in July, 6.2% above June.

$55.5 billion worth of prime and subprime auto ABS compose Fitch's indexes. The prime auto ABS index total nearly 70 transactions, while the subprime index comprises over 30.

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