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U.S. Auto Loan ABS Tracker: August 2021 Performance

COMMENTS

SF Credit Brief: U.S. Structured Finance Issuance Of $97 Billion In November Marks Second Consecutive Monthly Record

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A Sudden Correction To Fast-Rising U.S. Home Prices Isn't Likely

Take Notes: The Stability Of U.S. Timeshare ABS Performance During The Pandemic

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U.S. Credit Card Quality Index: Monthly Performance--October 2021


U.S. Auto Loan ABS Tracker: August 2021 Performance

Losses Rose Month Over Month But Remained Lower Than August 2019

Prime and subprime net losses increased month over month but still remain lower than historical pre-pandemic levels. Prime net losses came in at 0.18% for August, up from 0.09% in July, but they were down from 0.25% and 0.57% in August 2020 and August 2019, respectively. Subprime losses increased to 3.54% for August from 2.71% in July and 2.93% in August 2020 but remained less than half of August 2019's level of 8.75% (see table 1 and chart 1). Both the prime and subprime segments reported higher losses due to the seasonal decline in recovery rates and, to a lesser extent, the fading impact of the government stimulus earlier in the year and the termination of enhanced unemployment benefits in many states.

Table 1

Net Loss Rate Composite(i)
Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Jul-21 Aug-21
Prime (%) 0.42 0.42 0.50 0.55 0.64 0.67 0.55 0.57 0.25 0.09 0.18
Subprime (%) 5.40 5.31 7.34 7.45 8.67 8.97 8.65 8.75 2.93 2.71 3.54
Subprime modified (%)(ii) 4.39 4.84 6.44 6.63 6.90 7.09 6.92 6.59 2.71 2.14 2.83
(i)Represents monthly annualized losses. (ii)Three large deep subprime issuers--American Credit Acceptance, Exeter, and DRIVE--are excluded.

Chart 1

image

Recoveries Continued To Fall Month On Month But Remained Higher Than August 2019

Prime recoveries decreased to 75.99% in August from 91.41% in July and 80.13% in August 2020 but remained higher than August 2019's level of 59.41% (see table 2 and chart 2).

Table 2

Recovery Rate Composite(i)
Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Jul-21 Aug-21
Prime (%) 62.94 63.89 59.18 57.17 54.87 55.93 58.32 59.41 80.13 91.41 75.99
Subprime (%) 45.44 49.73 43.11 40.11 39.42 39.15 41.05 42.95 64.99 59.71 55.03
Subprime modified (%)(ii) 53.26 50.34 44.14 41.47 40.87 39.30 40.82 42.41 60.33 59.61 53.67
(i)Represents monthly recovery rates. (ii)Three large deep subprime issuers--American Credit Acceptance, Exeter, and DRIVE--are excluded.

Chart 2

image

Subprime recoveries decreased to 55.03% in August from 59.71% in July and 64.99% in August 2020. They, like prime recoveries, remained higher than August 2019's level (42.95%).

Recoveries peaked this year in May for prime (113.74%) and April for subprime (79.2%) and have been normalizing since then as used vehicle supply and demand imbalances are coming more in line. Further, we typically see lower recovery rates as we approach year end as existing models become one year older and new models enter the market.

S&P Global Ratings assumes that recovery rates will revert to historical levels when determining its expected cumulative net loss (ECNL) levels.

Delinquencies Continued To Rise But Remained Lower Than August Historical Levels

The prime 60-plus-day delinquency rate increased slightly to 0.29% in August from 0.27% in July but was below 0.35% in August 2020 and 0.41% in August 2019 (see table 3 and chart 3). The subprime 60-plus-day delinquency rate increased to 3.43% in August from 3.16% in July but was down from 3.72% in August 2020 and 5.25% in August 2019. Further, prime and subprime delinquencies remained close to historical lows for the month of August. In fact, prime delinquencies remained at a record low for the month, and for subprime we'd have to go back to August 2012 and August 2013 to see equivalently low August delinquencies.

Table 3

60-Plus-Day Delinquency Rate Composite(i)
Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Jul-21 Aug-21
Prime (%) 0.39 0.38 0.42 0.47 0.47 0.48 0.40 0.41 0.35 0.27 0.29
Subprime (%) 3.33 3.51 4.28 4.58 5.16 5.10 5.02 5.25 3.72 3.16 3.43
Subprime modified (%)(ii) 2.35 3.31 3.75 3.89 3.99 3.77 3.48 3.82 2.76 2.09 2.15
(i)Represents 60+ day delinquencies. (ii)Three large deep subprime issuers--American Credit Acceptance, Exeter, and DRIVE--are excluded.

Chart 3

image

We expect delinquencies to rise in coming months, especially in subprime, due to the waning benefit of economic stimulus and the expiration of enhanced unemployment benefits. However, the improving employment landscape and continued strength in the used vehicle market should temper such an increase.

144a Subprime Issuers Reported Fourth Consecutive Month Of Higher Extension Rates

After reaching a pandemic low of 1.60% in April 2021 (following the receipt of the March 2021 stimulus checks), total subprime extensions have been growing, reaching 3.05% in August, although this remained below August 2020's level of 3.17%. The 144a subprime issuers drove the increase in the latest month as their deferrals rose for the fourth consecutive month to 4.08% from 3.94% in July, while Reg AB II public issuers reported a drop to 1.83% from 2.02% in July (see table 4 and chart 4). In fact, among the public subprime issuers, AmeriCredit and Santander's SDART and DRIVE platforms reported an improvement both month over month and year over year (see table 5a).

The increase in 144a extensions to 4.08% represented a 30% year-over-year increase from 3.13%. However, some issuers that reported higher year-over-year extensions turned in lower levels than in August 2019. For example, American Credit Acceptance, First Investors, GLS, and Westlake all reported a 20% or more increase in year-over-year extension rates, but because their year-ago levels were lower than August 2019, their August 2021 deferral levels remained below the pre-pandemic August 2019 rates (table 5a). Some issuers explained to us that their year-ago extension rates were abnormally low because their borrowers didn't need assistant then given the high levels of extensions granted to them in March and April of 2020 as well as the government stimulus and other support that was being provided.

Prime extension rates increased to 0.37% in August 2021 from 0.34% in July but remained below August 2020's level of 0.63%.

Table 4

Extensions (%)
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20
Prime extensions--Reg AB II issuers (%) 0.40 0.32 3.75 5.76 2.16 1.39 0.86 0.63 0.55 0.52
Subprime extensions--Reg AB II issuers (%) 2.00 1.53 6.82 15.75 8.90 7.66 5.29 3.22 3.65 3.78
Subprime extensions--144a issuers (%) 4.48 3.38 6.24 9.76 5.95 3.45 3.08 3.13 3.54 3.84
Subprime extensions--Reg AB II issuers plus 144a issuers (%) 3.22 2.47 6.52 12.62 7.34 5.28 4.04 3.17 3.59 3.81
Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21
Prime extensions--Reg AB II issuers (%) 0.55 0.73 0.46 0.40 0.34 0.24 0.27 0.34 0.34 0.37
Subprime extensions--Reg AB II issuers (%) 4.06 4.84 3.50 2.40 1.80 1.17 1.49 1.85 2.02 1.83
Subprime extensions--144a issuers (%) 4.29 5.00 4.11 3.31 2.65 2.05 2.96 3.46 3.94 4.08
Subprime extensions--Reg AB II issuers plus 144a issuers (%) 4.19 4.93 3.86 2.83 2.21 1.60 2.23 2.69 3.03 3.05

Chart 4

image

Table 5a

Subprime Issuer Shelf Extension % (Based On $ Balance)
Shelf name Aug-19 Mar-20 Apr-20 Aug-20 Jul-21 Aug-21
American Credit Acceptance 3.43 3.66 5.15 2.03 2.33 2.47
AmeriCredit 3.66 4.11 6.93 2.77 2.64 2.52
Avid 1.84 3.43 2.82 3.56 3.14 3.27
CPS 3.18 6.18 10.21 3.49 3.57 3.67
DRIVE N/A 8.14 20.64 3.86 2.05 1.76
DriveTime 3.40 2.54 7.93 1.67 4.73 4.40
Exeter 3.68 4.34 11.80 4.55 4.65 4.81
First Investors 3.67 4.38 3.94 2.09 2.42 2.94
Flagship 2.86 9.26 18.81 2.60 3.25 3.54
GLS 3.45 4.92 11.39 2.09 2.56 3.27
Prestige 2.22 2.85 6.24 2.33 2.88 2.85
SDART N/A 7.04 17.84 2.97 1.49 1.25
Tidewater 2.16 0.35 0.02 2.41 1.95 1.60
United Auto Credit 3.84 7.54 6.02 3.75 2.42 2.79
Westlake 5.51 11.73 7.41 4.35 5.18 5.41
World Omni Select N/A 14.72 19.58 1.51 1.27 1.24
N/A--Not applicable.

Of the 16 subprime issuers, nine reported higher extensions in August compared to July. Westlake continued to report the highest levels (5.41%), with Exeter having the second highest rates (4.81%).

Table 5b

Prime Issuer Shelf Extension % (Based On $ Balance)
Shelf Name Jan-20 Feb-20 Mar-20 Apr-20 Aug-20 Jul-21 Aug-21
Ally 0.30 0.37 12.01 7.49 0.83 0.52 0.53
BMW 0.19 0.17 2.00 7.58 0.45 0.24 0.24
CapOne 0.01 0.01 0.82 1.94 0.40 0.10 0.10
CarMax 0.46 0.38 3.33 7.33 0.74 0.38 0.45
CRART 1.51 0.93 7.68 11.84 1.74 0.87 1.10
Fifth Third 0.17 0.12 0.97 4.91 0.08 0.06 0.12
Ford 0.97 0.75 6.30 6.35 1.16 0.79 0.87
GMF 0.44 0.32 0.81 2.27 0.39 0.32 0.31
Harley 0.19 0.20 1.85 4.00 0.47 0.23 0.27
Honda 0.16 0.11 2.03 4.51 0.41 0.10 0.11
Hyundai 0.39 0.25 2.03 4.22 0.41 0.38 0.41
Mercedes 0.18 0.15 4.62 7.21 1.11 0.28 0.27
Nissan 0.59 0.44 4.19 5.57 1.03 0.42 0.52
Toyota 0.35 0.28 2.79 6.24 0.44 0.21 0.23
USAA 0.54 0.41 2.27 4.80 1.01 0.26 0.26
VW 0.22 0.21 0.60 5.81 0.69 0.16 0.15
World Omni 0.49 0.38 5.85 8.82 0.55 0.31 0.34

Of the 18 prime issuers, 11 reported higher extensions in August than in July. Even with the month-over-month increases, only Fifth Third had higher extensions than a year earlier (see table 5b). CRART and Ford had the highest extension rates for August at 1.10% and 0.87%, respectively.

Auto Loan ABS Rating Activity/Revised Loss Expectations

In September 2021, we revised our loss expectations (see "Auto Loan ABS COVID-19 Loss Adjustment Reassessed After Better-Than-Expected Performance," published July 8, 2021) and took the following rating actions:

These rating actions resulted in 43 upgrades and 14 affirmations (see table 6).

Table 6

Historical Ratings Activity--U.S. ABS Auto Loans
Period Upgrades Downgrades
2015 177 0
2016 357 0
2017 322 0
2018 335 2
2019 432 5
2020 332 8
2021 (YTD August 2021) 341 0
Total 2,296 15
YTD--Year to date.

Of the 21 transactions we reviewed in September, we lowered our ECNLs on all transactions (see tables 7-10).

Table 7

Fifth Third Auto Trust
Series Initial expected net loss range (%) Former expected lifetime CNL (%) Revised/maintained expected lifetime CNL (%) (revised September 2021)
2019-1 0.65-0.75 1.05-1.15 0.70-0.80
CNL--Cumulative net loss.

Table 8

Volkswagen Auto Loan Enhanced Trust
Series Initial expected net loss range (%) Revised/maintained expected lifetime CNL (%) (revised September 2021)
2018-1 0.80-0.90 Up to 0.80
2018-2 0.80-0.90 Up to 0.75
CNL--Cumulative net loss.

Table 9

AmeriCredit Automobile Receivables Trust
Series Initial expected net loss range (%) Former expected lifetime CNL (%) Revised/maintained expected lifetime CNL (%) (revised September 2021)
2020-2 12.00-12.50 N/A 7.25-7.75
CNL--Cumulative net loss. N/A--Not applicable.

The analysis covered Credit Acceptance Auto Loan Trust 2018-3 and 2019-1. See "Three Ratings Raised And One Affirmed On Two Credit Acceptance Auto Loan Trust Transactions," published Sept. 29, 2021.

Table 10

CPS Auto Receivables Trust
Series Initial expected net loss range (%) Former expected lifetime CNL (%) Revised/maintained expected lifetime CNL (%) (revised September 2021)
2016-C 16.75-17.75 20.50-21.00 Up to 20.00
2016-D 17.00-17.75 20.00-20.50 Up to 18.75
2017-A 17.00-18.00 19.75-20.25 18.00-18.50
2017-B 18.00-19.00 19.50-20.00 17.25-17.75
2017-C 18.00-19.00 16.75-17.25 15.25-15.75
2017-D 18.00-19.00 17.25-18.25 15.50-16.00
2018-A 18.00-19.00 17.00-18.00 14.50-15.00
2018-B 18.00-19.00 18.00-19.00 14.50-15.50
2018-C 17.00-18.00 16.75-17.75 14.25-15.25
2018-D 17.75-18.75 17.50-18.50 14.25-15.25
2019-A 17.75-18.75 18.25-19.25 13.75-14.75
2019-B 18.50-19.50 20.00-21.00 14.25-15.25
2019-C 18.50-19.50 20.25-21.25 15.00-16.00
2019-D 18.50-19.50 20.25-21.25 15.00-16.00
2020-B 21.50-22.50 N/A 16.00-17.00
CNL--Cumulative net loss. N/A--Not applicable.

Appendix: Auto Tracker Frequently Asked Questions

How do you define prime auto loan ABS?

We generally categorize prime auto loan ABS transactions as those backed by loan pools with initial ECNLs of 3.0% or less, average FICO scores of 700 or higher, and annual percentage rates (APRs) of 0.0%-5.0%.

How do you define subprime auto loan ABS?

We generally categorize subprime auto loan ABS transactions as those backed by loan pools with initial ECNLs of at least 7.5%, average FICO scores of less than 620, and APRs that exceed 14.0%.

How do you calculate the monthly net loss rate?

The monthly net loss rate is annualized. It equals each transaction's net loss rate weighted by the transaction's ending pool balance for the current month over the aggregate ending pool balance of all transactions included in the index.

We only allow a transaction to enter the composite starting in its fourth month outstanding. Transactions usually have zero or low losses during their first three months, which dilutes the composite figures.

How do you calculate the monthly recovery rate?

We calculate recoveries by taking the recovery amount reported (which typically includes all recoveries, including disposition proceeds, post-disposition proceeds, and any other reported recoveries) over the gross loss amount for the current month. We then weight each transaction's recovery percentage by the transaction's ending pool balance for the current month over the aggregate ending pool balance of all transactions included in the index.

We only allow a transaction to enter the index starting in its fourth month outstanding. During a transaction's first three months, unusually high or low recoveries are reported, leading to a spike in the composite figures.

How do you calculate the monthly 60-plus-day delinquency rate?

We calculate delinquencies by taking each transaction's 60-plus-day delinquency amount over the ending pool balance for the current month. We then weight each transaction's 60-plus-day delinquency percentage by the transaction's ending pool balance for the current month over the aggregate ending pool balance of all transactions included in the composite.

We only allow a transaction to enter the composite starting in its fourth month outstanding. During the transaction's first three months, zero or fewer delinquencies are reported, which dilutes the composite figures.

What is the Auto Loan Static Index (ALSI)?

Our ALSI monitors the credit performance of securitizations that were originated in the same year on a weighted average basis. The number of months displayed for each vintage is generally determined by the last month that all securitizations for that time period have a data point. We calculate the prime and subprime ALSI CNLs by taking the weighted average of the CNLs of the transactions that were completed in the same time period (generally a year). Each transaction's CNL is weighted by its initial pool balance over the aggregate initial pool balance of all the transactions included in the index for that period. In the subprime ALSI, transactions from Byrider Finance LLC (doing business as CarNow Acceptance Corp.), Credit Acceptance Corp., and DriveTime Automotive Group Inc. are excluded because they do not have the typical indirect auto loan business model.

Which transactions are included in the prime, subprime, and modified subprime composites and indices?

For a list of the transactions included in our prime, subprime, and modified subprime composites and indices, see "U.S. Auto Loan ABS Tracker: March 2019," published May 23, 2019. However, note that we subsequently added transactions rated by S&P Global Ratings that have since closed, most prime transactions that closed and were not rated by S&P Global Ratings from 2016 through the present, and most Santander Drive Auto Receivables Trust and AmeriCredit Automobile Receivables Trust transactions not rated by S&P Global Ratings.

Related Research

This report does not constitute a rating action.

Primary Credit Analyst:Amy S Martin, New York + 1 (212) 438 2538;
amy.martin@spglobal.com
Secondary Contacts:Timothy J Moran, CFA, FRM, New York + 1 (212) 438 2440;
timothy.moran@spglobal.com
Jennie P Lam, New York + 1 (212) 438 2524;
jennie.lam@spglobal.com
Kenneth D Martens, New York + 1 (212) 438 7327;
kenneth.martens@spglobal.com
Steve D Martinez, New York + 1 (212) 438 2881;
steve.martinez@spglobal.com
Research Contributor:Nupur Hule, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

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