articles Ratings /ratings/en/research/articles/230609-u-s-auto-loan-abs-tracker-april-2023-performance-12756885 content esgSubNav
Discover more about S&P Global’s offerings
Register Reset Password
In This List
COMMENTS

U.S. Auto Loan ABS Tracker: April 2023 Performance
NEWS

Contego CLO XII DAC European Cash Flow Notes Assigned Preliminary Ratings

COMMENTS

CreditWeek: What Are The Biggest Risks To Credit Markets In 2024?

NEWS

Neuberger Berman Loan Advisers Euro CLO 5 DAC European Cash Flow Reset Notes Assigned Ratings

COMMENTS

U.S. BSL CLO Obligors: Corporate Rating Actions Tracker 2023 (As Of Dec. 1)


U.S. Auto Loan ABS Tracker: April 2023 Performance

Key Takeaways

  • U.S. auto loan ABS performance was mixed in April 2023, with prime losses rising and returning to pre-pandemic levels and subprime losses declining and falling below April 2019's level.
  • Delinquencies ticked up to the highest level for the month of April since April 2011 for prime and to a record level for subprime.
  • In May, we evaluated 40 transactions, which resulted in 80 upgrades and 78 affirmations.We lowered our expected cumulative net losses on 30 of these transactions, increased them on six, and maintained them on four. As of May 31, we have one 'BB (sf)' rated class from EART 2022-5 on CreditWatch negative.

Losses Continue To Normalize

Prime net losses increased to 0.41% in April 2023 from 0.35% in March 2023; however, they are similar to the pre-pandemic loss level of 0.41% in April 2019. On a year-over-year basis, prime losses almost tripled from 0.14% in April 2022, but year-ago performance benefitted from the lingering positive effects of COVID-19-related stimulus and vehicle shortages. Prime losses did rise month-over-month for about half of the issuers, but Toyota Auto Receivables Trust (Toyota) and Hyundai Auto Receivables Trust (Hyundai) were the major contributors to the increase in losses, together making up approximately 23.00% of the total prime index. Their increase in losses was attributable to their recoveries declining from greater than 100.00% in March to approximately 95.00% and 85.00%, respectively.

Subprime losses continued to drop for the third month in a row to 5.52% from 5.84% and were lower than the pre-pandemic April 2019 loss level of 6.59%. While losses increased by 58.00% from April 2022's level of 3.49%, that was an unusually low loss rate due to extraordinary factors that are unlikely to be repeated.

April was a particularly strong month for subprime, as losses declined despite lower recovery rates. We attribute the improvement to another strong month of tax refunds and potentially tighter underwriting strategies taken by some issuers during the second half of 2022 and earlier this year in response to worse-than-expected performance on their 2022 originations. A few more months of performance, assuming unemployment levels remain low, will help us better gauge if improved underwriting is contributing to lower losses. Issuers contributing to lower losses in April were American Credit Acceptance, GLS, CPS, Exeter, and United Auto Credit.

After netting out three deep subprime issuers (American Credit Acceptance, Exeter, and DRIVE), modified subprime losses decreased by 15 basis points (bps) to 5.15% in April 2023 from 5.30% in March 2023 and decreased by 44 bps from 5.59% in April 2019.

Effective April 2023, we have moved WOSAT 2021-A out of the subprime index. We did this as a result of our original expected cumulative net losses (ECNLs) for this transaction being 6.50% (under the 7.50% minimum threshold for subprime prime using our classifications) and our revised loss level being 3.50%. As a result of this change, prior months have been recalculated, and March 2023's subprime loss level increased to 5.84% from 5.80%.

Table 1

Net loss rate composite(i)
Apr-09 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 Mar-23 Apr-23
Prime (%) 1.59 0.28 0.25 0.38 0.49 0.46 0.41 0.67 0.03 0.14 0.35 0.41
Subprime (%) 7.59 4.48 4.31 5.90 7.04 6.43 6.59 9.32 1.47 3.49 5.84 5.52
Subprime modified (%)(ii) N/A 4.15 3.69 4.71 5.63 5.21 5.59 7.04 1.47 2.84 5.30 5.15
(i)Represents monthly annualized losses. (ii)Three large deep subprime issuers--American Credit Acceptance, Exeter, and DRIVE--are excluded. N/A--Not applicable.

Chart 1

image

Recoveries Continued To Normalize, But Subprime Recoveries Were Higher Than Pre-Pandemic Levels

Prime recoveries declined to 65.87% in April 2023 from 69.34% in March 2023. Toyota, Hyundai, and Ally Auto Receivables Trust (Ally) were the major issuers hindering recoveries for April 2023. However, the recovery rates for both Toyota and Hyundai declined from above 100.00%, and Ally's average recovery rate declined to 56.33% from 74.38% the prior month. April's recovery rate was slightly lower than April 2019's 67.86% and significantly lower than April 2022's 81.28% and April 2021's 103.43%. Those months were particularly strong due to the shortage of new vehicle inventory. April 2023's recovery rate conformed with April 2018's 65.77%.

Subprime recoveries declined to 55.13% in April 2023 from 59.71% in March 2023. They continue to decline and normalize from the unusual high recovery rates of 79.29% in April 2022 and 64.88% in April 2021. While trending downward, subprime recoveries in April 2023 remained higher than April 2019's level of 49.12%. For subprime, Santander Drive Auto Receivables Trust (Santander's SDART platform), Drive Auto Receivables Trust (Santander's DRIVE platform), and Exeter Automobile Receivables Trust (Exeter) were the most significant issuers contributing to the decline. Still, their recovery rates remained strong. Santander's declined to 71.40% from 85.26%, DRIVE's declined to 91.40% from 110.35%, and Exeter's declined to 53.14% from 62.42%.

Lower recoveries were due, in our view, to lower used vehicle values stemming from weaker vehicle demand and improved supply levels. This is supported by a slight decrease for the month in the Manheim Used Vehicle Value Index (see chart 2).

Table 2

Recovery rate composite (%)(i)
Apr-09 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 Mar-23 Apr-23
Prime 56.49 72.87 78.76 70.36 71.16 65.77 67.86 36.83 103.43 81.28 69.34 65.87
Subprime 47.38 56.59 61.84 50.61 44.73 47.36 49.12 25.06 79.29 64.88 59.71 55.13
Subprime modified(ii) N/A 56.95 62.74 52.42 47.28 46.82 48.58 27.53 74.79 63.17 57.26 52.98
(i)Represents monthly recovery rates. (ii)Three large deep subprime issuers-- American Credit Acceptance, Exeter, and DRIVE--are excluded. N/A--Not applicable.

Chart 2

image

Delinquencies Continued Their Ascent, Reaching Their Highest April Levels In Years

The prime 60-plus-day delinquency rate increased to 0.46% in April 2023 from 0.41% in March 2023 and 0.35% in April 2023. In addition, delinquencies remained higher than their pre-pandemic level of 0.36% in April 2019 and were at their highest April level since 2011.

Similarly, the subprime 60-plus-day delinquency rate increased to 4.84% in April 2023 from 4.63% in March 2023 and 4.33% in April 2019. This was the highest April delinquency rate for subprime. March and April are generally the seasonally low period for delinquencies, and, as we move into the summer months when tax refunds have been largely spent, late payments will likely rise.

We are concerned about the growing increase in delinquencies and believe it indicates that consumers are encountering financial stress due to inflationary pressures and taking on more debt.

Table 3

60-plus-day delinquency rate composite (%)(i)
Apr-09 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 Mar-23 Apr-23
Prime 0.61 0.34 0.33 0.38 0.38 0.37 0.36 0.38 0.23 0.35 0.41 0.46
Subprime 3.85 3.27 3.59 3.72 4.25 4.01 4.33 4.31 2.51 3.94 4.63 4.84
Subprime modified(ii) N/A 2.98 3.11 2.99 3.17 2.94 3.17 3.26 1.65 2.61 3.75 3.85
(i)Represents 60-plus-day delinquencies. (ii)Excludes three large deep subprime issuers: American Credit Acceptance, Exeter, and DRIVE. N/A--Not applicable.

Chart 3

image

We have not included extension data in this monthly tracker but will be including them in our next expanded quarterly tracker in June.

Auto Loan ABS Rating Activity/Revised Loss Expectations

In May 2023, we revised our loss expectations and took certain rating actions:

These rating actions resulted in 80 upgrades and 78 affirmations, bringing the total number of upgrades, affirmations, and downgrades on S&P Global Ratings' publicly rated U.S. auto loan ABS transactions to 132, 149, and five, respectively, through May 31, 2023 (see table 4).

Table 4

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 579 0
2022 419 6
2023(i) 132 5
Total 3,085 26
(i)As of May 31, 2023.

Table 5

Historical ratings activity--Canadian ABS auto loans
Period Upgrades Downgrades
2021 8 0
2022 3 0
2023(i) 0 0
Total 11 0
(i)As of April 30, 2023.

For the 40 transactions we reviewed in May, we increased our ECNLs on six (three subprime and three prime transactions from 2021 and 2022), lowered them on 30, and maintained them on four.

Table 6

Volkswagen Auto Loan Enhanced Trust 2021-1
Series Initial lifetime CNL exp. Revised lifetime CNL exp.(i)
2021-1 0.85-0.95 0.70
(i)As of the April 2023 distribution date. CNL exp.--Cumulative net loss expectations.

Table 7

Nissan Auto Receivables Owner Trust transactions
Series Original lifetime CNL exp. Former lifetime CNL exp.(i) Revised lifetime CNL exp.(ii)
2019-C 1.05-1.15 1.15-1.35 1.15
2020-A 1.50-1.70 0.75-0.95 0.40
2020-B 1.50-1.70 0.60-0.80 0.30
2021-A 1.30-1.50 0.70-0.90 0.40
2022-A 1.15-1.35 N/A 0.85
(i)Previously revised in February 2022 for series 2019-C, 2020-A, and 2020-B and in August 2022 for series 2021-A. (ii)As of the April 2023 distribution date. CNL exp.--Cumulative net loss expectations. N/A--Not applicable.

Table 8

CPS Auto Receivables Trust transactions
Series Original lifetime CNL exp. Revised lifetime CNL exp.
2021-C 19.25 16.00
2022-A 17.50 19.50
CNL exp.--Cumulative net loss expectations.

Table 9

GM Financial Consumer Automobile Receivables Trust
Series Original lifetime CNL exp. Revised lifetime CNL exp.
2022-1 1.10-1.30 0.85
2022-2 1.10-1.30 0.90
CNL exp.--Cumulative net loss expectations. N/A--Not applicable.

Table 10

CarMax Auto Owner Trust transactions
Series Original lifetime CNL exp. Revised lifetime CNL exp.(i)
2021-4 2.15-2.25 2.35
2022-1 2.15-2.25 2.30
2022-2 2.15-2.25 2.45
(i)As of May 2023. CNL exp.--Cumulative net loss expectations.

Table 11

Exeter Automobile Receivables Trust transactions
Series Original lifetime CNL exp. Former lifetime CNL exp.(i) Revised lifetime CNL exp.(ii)
2018-4 20.50-21.50 16.00 (15.75-16.25) Up to 15.75
2019-1 20.50-21.50 16.50 (16.25-16.75) Up to 16.00
2019-2 20.50-21.50 17.00 (16.75-17.25) Up to 16.50
2019-3 20.50-21.50 16.50 (16.25-16.75) 16.00
2019-4 20.50-21.50 16.00 (15.75-16.25) 15.60
2020-1 20.50-21.50 16.00 (15.75-16.25) 15.50
2020-2 23.75-24.75 15.50 (15.25-15.75) 14.25
2020-3 23.50-24.50 15.50 (15.25-15.75) 14.50
2021-1 23.00-24.00 16.00 (15.75-16.25) 15.25
2021-2 21.00-22.00 N/A 18.00
2021-3 19.75-20.75 N/A 20.25
2021-4 19.50-20.50 N/A 21.25
(i)As of March 2022. (ii)As of May 2023. CNL exp.--Cumulative net loss expectations. N/A–-Not applicable.

Table 12

Carvana Auto Receivables Trust transactions
Series Original lifetime CNL exp. Revised lifetime CNL exp.(i)
2021-N1 20.50 (20.00-21.00) 11.50
2021-N2 20.50 (20.00-21.00) 14.00
2021-N3 18.50 (18.00-19.00) 16.50
2021-N4 18.25 (17.75-18.75) 17.25
2022-N1 17.50 (17.00-18.00) 17.50
(i)As of May 2023. CNL exp.--Cumulative net loss expectations.

Table 13

Carvana Auto Receivables Trust Prime Auto ABS transactions
Series Original lifetime CNL exp. Previous lifetime CNL exp.(i) Revised lifetime CNL exp.(ii)
2020-P1 3.75 (3.50-4.00) 2.25 (2.00-2.50) 1.25
2021-P1 3.60 (3.35-3.85) N/A 1.25
2021-P2 3.60 (3.35-3.85) N/A 1.50
2021-P3 2.75 (2.50-3.00) N/A 1.75
2021-P4 2.75 (2.50-3.00) N/A 1.75
2022-P1 2.75 (2.50-3.00) N/A 2.15
2022-P2 2.75 (2.50-3.00) N/A 2.15
(i)Revised in February 2022. (ii)As of May 2023. CNL exp.--Cumulative net loss expectations. N/A--Not applicable.

Table 14

United Auto Credit Securitization Trust transactions
Series Original lifetime CNL exp. Previous lifetime CNL exp.(i) Revised lifetime CNL exp.(ii)
2021-1 21.25-22.25 15.50-16.50 15.00
2022-1 20.50 N/A 22.00
2022-2 20.25 25.50 25.50
(i)As of the March 2022 distribution date for series 2021-1 and as of the April 2023 distribution date for series 2022-2. (ii)As of the May 2023 distribution date. CNL exp.--Cumulative net loss expectations. N/A--Not applicable.

Appendix I: 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 3.25% or less and average FICO scores of 700 or higher. We include CarMax and Carvana in this segment.

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 annual percentage rates 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. Then we 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. Then we 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 and subprime composites and indices, see "U.S. Auto Loan ABS Tracker: June 2022 Performance," published Aug. 18, 2022. However, note that we subsequently added transactions that have since closed.

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:Jennie P Lam, New York + 1 (212) 438 2524;
jennie.lam@spglobal.com
Steve D Martinez, New York + 1 (212) 438 2881;
steve.martinez@spglobal.com
Sanjay Narine, CFA, Toronto + 1 (416) 507 2548;
sanjay.narine@spglobal.com
Research Contributor:Manali Kithani, CRISIL Global Analytical Center, an S&P affiliate, Mumbai

No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.spglobal.com/usratingsfees.

Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back