Typical seasonal variation in discretionary consumer spending patterns last quarter helped push up loan losses and delinquency rates as the volume of nonprime auto lending continued to grow. The average net loss rate for lenders covered in Fitch's most recent analysis rose to 1.01% in fourth-quarter 2013, up 16 bps from third-quarter 2013 and 3 bps from the year-earlier period.
Average delinquency rates worsened more materially last quarter, rising to 3.89% -- up 57 bps sequentially and 34 bps year-over-year.
Total nonprime auto ABS issuance increased 21% for all of 2013 to
The strongest level of new vehicle sales since 2007 is supporting loan originations, and we expect 2014 new vehicle sales to rise to 16.0 million units from 15.5 million last year.
Rating Outlooks for major auto lenders covered in our analysis remain largely Stable, but our sector outlook is negative, reflecting more intense competitive pressure in the nonprime space, a further easing of underwriting terms, continued moderation in used car values and moderate deterioration in asset quality.
For a complete rundown of auto asset quality trends in the fourth quarter, see the special report "U.S. Auto Asset Quality Review: 4Q13," dated
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
Mohak Rao, CFA
70 W. Madison
Source: Fitch Ratings
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