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Fitch: Credit Improvement Across U.S. Auto Loan Sector to Moderate as Subprime Lending Increases

August 28, 2014



CHICAGO--(BUSINESS WIRE)-- Link to Fitch Ratings' Report: U.S. Auto Asset Quality Review: 2Q14 (Seasonal Trends Support Credit Improvement; Moderation Expected In 2H14)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=764548

Credit losses and delinquencies for U.S. auto loans and leases declined in the 1H 2014 with a normalization of auto credit trends closer to historical averages to persist in the 2H of this year, according to Fitch Ratings.

Fitch attributes the declines to the seasonality generally associated with consumer discretionary spending. The average net loss rate for lenders covered in Fitch's report was 0.60% in 2Q'14, down 63 bps from 4Q'13 but up 27 bps from 2Q'13. Lenders have been easing underwriting standards in the face of rising auto loan demand in a competitive environment.

Fitch notes that easing underwriting standards has led to both an easing of overall credit terms and an increase in subprime leading. This is evidenced by an increase in auto ABS issuance and lower FICO's scores across several lenders in Fitch's ratings portfolio. Credit quality has not yet been affected materially, although Fitch believes that easing underwriting standards combined with car value declines will lead to a normalization of auto credit trends in line with historical averages.

Increased nonprime lending, eased underwriting standards, continued moderation in used car values and increased regulatory scrutiny are several challenges that face auto lenders in coming periods. A rising interest rate environment would be a credit neutral for most auto loan lenders.

The full report 'U.S. Auto Asset Quality Review: 2Q14' is available at 'www.fitchratings.com.'

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings Inc.

Richard Wilusz, +1-312-368-5459

Associate Director

Fitch Ratings Inc.

70 West Madison Street

Chicago, IL 60602

or

Mohak Rao, +1-212-908-0559

Director

or

Media Relations

Brian Bertsch, +1-212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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