Profitable auto dealer networks supported by healthy demand for and sales of new and used vehicles are helping to position U.S. dealer floorplan ABS for strong performance headed into next year, according to Fitch Ratings in its annual portfolio review report.
Headed into 2015, Fitch is projecting solid asset trust metrics including stable monthly payment rates (MPR) and agings, and virtually zero trust losses.
'U.S. automobile dealerships networks are benefitting from higher auto sales, which are expected to top 16 million new units this year,' said Senior Director
Fitch's outlook for both asset and ratings performance is stable for the rest of 2014 into next year. This follows one of the most profitable years on record for U.S. auto dealers in 2013, with 2014 on track to exhibit similar dealership profit levels.
That said, there are factors that could impact dealers negatively and dent dealer profits over the next 6-to-12 months. 'Any slowdown in the U.S. economy and a dip in auto sales could crimp dealer floorplan ABS performance,' said Heard. Other potentially adverse developments include over-production resulting in bloated inventory levels; rising dealership costs including higher floorplanning interest and operational expenses; and fierce competition and/or overexpansion.
Fitch expects intense competition among dealerships over the next year going into 2015, which is nothing new to the sector. Specifically, dealership acquisitions by larger dealership groups are elevated as they look to expand and buy-out existing dealers when opportunities arise. Fitch has also witnessed acquisition activity rise this year above 2013 levels to date.
Dealer floorplan ABS issuance in 2014 will surpass 2013. Fitch also expects over
'U.S. Dealer Floorplan ABS: Positive Momentum in 2014' is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at 'www.fitchratings.com'.
Source: Fitch Ratings
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