Key Takeaways
- Despite strong recovery rates in August, U.S. auto loan ABS losses rose to record-high levels. Prime losses rose to the highest August levels since 2010 and subprime losses rose to the highest August levels since 2009.
- Delinquency rates finally showed some improvement, with 60-plus-day delinquencies remaining nearly stable for prime and declining slightly month over month and year over year for subprime.
- In September, we upgraded nine classes, affirmed 46, and downgraded three (all downgrades were on subprime transactions from 2022, two of which were downgraded to 'CC (sf)').
Recovery rates improved substantially in August relative to July, but not enough to offset higher defaults, causing annualized net losses to rise considerably. We've heard anecdotally that the weakness in recovery rates in July and the improvement in August were somewhat related to a cyber incident at CDK Global, a company that provides car dealerships with software to manage their operations, including vehicle sales. The incident disrupted thousands of dealers from mid-June to early July, which resulted in lower-than-expected sales in June and may have contributed to excess inventory in early July. We believe this created unfavorable conditions in the wholesale vehicle market and led some of our issuers to wait until August to liquidate their repossessions.
Losses Spiraled Upward, Especially For Subprime
Prime
Prime annualized net losses grew month over month to 0.78% and were higher than the August 2023 and August 2019 pre-pandemic levels of 0.55% and 0.57%, respectively. Not only did prime losses jump 44.00% year over year, but it was the highest August level since 2010.
Of the approximately 20 issuers that had seasoned transactions (outstanding for at least four months) as of August 2024 and August 2023, 17 reported higher losses. The top three contributors to the higher year-over-year losses were CarMax (which represents 10.57% of our prime composite); Mercedes-Benz Financial Services USA (4.28%); and Citizens (4.86%), though its losses remain around the industry average.
Subprime
Subprime losses continued the upward trend for the third consecutive month to 9.64% in August from 8.82% a month earlier. In addition, like prime, subprime losses were higher than the August 2023 and August 2019 pre-pandemic levels of 8.96% and 8.75%, respectively. Not only did subprime losses rise 7.58% year over year, but it was the highest August level since 2009.
Of the 17 subprime issuers in our subprime composite that had transactions outstanding as of August 2024 and August 2023, all but five reported higher losses. The top three contributors to the higher year-over-year losses were GLS Auto Receivables Trust (GLS; which represents 8.04% of our composite), Westlake Automobile Receivables Trust (14.20%), and Santander Drive Auto Receivables Trust's platform (26.70%). Part of the reason for GLS's higher losses in August were due to it identifying a data reporting error in which certain defaulted customer accounts were not reported as defaulted receivables in the related monthly servicer's report. This impacted customer accounts where the vehicle was repossessed and sold for more than the defaulted balance owned by the customer. According to the company, this was solely a reporting error and did not impact any of GLS's servicing systems or the servicing of the related customer accounts. GLS has reconciled all impacted errors and has correspondingly reflected charge-off amounts totaling $6.4 million in August's servicing reports across its 2020-1 to 2024-3 deals. Netting out these adjustments, the subprime composite's annualized losses would have been 9.50% in August, still significantly higher month over month, year over year, and relative to August 2019.
Table 1
| Net loss rate composite(i) | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Aug-10 | Aug-15 | Aug-16 | Aug-17 | Aug-18 | Aug-19 | Aug-20 | Aug-21 | Aug-22 | Aug-23 | Jul-24 | Aug-24 | |||||||||||||||
| Prime (%) | 0.84 | 0.55 | 0.64 | 0.67 | 0.55 | 0.57 | 0.25 | 0.18 | 0.38 | 0.55 | 0.75 | 0.78 | ||||||||||||||
| Subprime (%) | 6.71 | 7.45 | 8.67 | 8.97 | 8.65 | 8.75 | 2.95 | 3.53 | 7.69 | 8.96 | 8.82 | 9.64 | ||||||||||||||
| Subprime modified (%)(ii) | N/A | 6.63 | 6.90 | 7.09 | 6.92 | 6.59 | 2.71 | 2.82 | 5.65 | 7.84 | 7.94 | 8.63 | ||||||||||||||
| (i)Represents monthly annualized losses. (ii)Excludes three large deep subprime issuers: American Credit Acceptance, Exeter, and DRIVE. N/A--Not applicable. | ||||||||||||||||||||||||||
Chart 1
Recoveries Rose To Especially Strong Levels For Prime
Prime recoveries bounced back to 67.73% in August 2024 from 54.62% a month earlier, 61.82% in August 2023, and 59.41% in August 2019. The recovery rate for August 2024 was the highest since May 2023.
Subprime recoveries saw a marginal increase, rising to 36.60% in August 2024 from 34.97% a month earlier, but remaining substantially weaker than the 39.42% recorded for August 2023 and 42.97% for August 2019.
Table 2
| Recovery rate composite(i) | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Aug-10 | Aug-15 | Aug-16 | Aug-17 | Aug-18 | Aug-19 | Aug-20 | Aug-21 | Aug-22 | Aug-23 | Jul-24 | Aug-24 | |||||||||||||||
| Prime (%) | 60.84 | 57.17 | 54.87 | 55.93 | 58.32 | 59.41 | 80.13 | 75.99 | 59.28 | 61.82 | 54.62 | 67.73 | ||||||||||||||
| Subprime (%) | 43.88 | 40.11 | 39.42 | 39.15 | 41.05 | 42.97 | 64.96 | 55.10 | 44.83 | 39.42 | 34.97 | 36.60 | ||||||||||||||
| Subprime modified (%)(ii) | N/A | 41.47 | 40.87 | 39.30 | 40.82 | 42.41 | 60.33 | 53.67 | 44.81 | 38.89 | 36.55 | 38.92 | ||||||||||||||
| (i)Represents monthly annualized losses. (ii)Excludes three large deep subprime issuers: American Credit Acceptance, Exeter, and DRIVE. N/A--Not applicable. | ||||||||||||||||||||||||||
Chart 2
Delinquencies Improved Slightly For Subprime, But Remain High For Both Sectors
Prime
Prime 60-plus-day delinquencies were generally stable at 0.63% in August 2024 compared to 0.62% in July, but were above the August 2023 (0.55%) and August 2019 (0.41%) levels. Given the weak performance from several prime 2023 transactions and the normal pattern of the amount of late payments rising toward year end, we expect delinquency levels to continue increasing throughout the remainder of the year. We may also see higher delinquencies and extensions in September and October as a result of Hurricane Helene, which caused massive destruction in the Carolinas, Florida, Georgia, and Tennessee.
Of the 20 prime issuers in both S&P Global Ratings' August 2024 and August 2023 prime composites, 17 reported year-over-year increases in the amount of average late payments.
Subprime
The subprime 60-plus-day delinquency rate slightly dipped to 5.90% in August 2024, down eight basis points from 5.98% a month earlier and 13 basis points lower than in August 2023 (6.03%), but higher than in August 2019 (5.30%).
Of the 17 subprime issuers in our subprime composite in both August 2024 and August 2023, 11 reported year-over-year increases in the level of average late payments.
Table 3
| Sixty-plus-day delinquency rate composite(i) | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Aug-10 | Aug-15 | Aug-16 | Aug-17 | Aug-18 | Aug-19 | Aug-20 | Aug-21 | Aug-22 | Aug-23 | Jul-24 | Aug-24 | |||||||||||||||
| Prime (%) | 0.59 | 0.47 | 0.47 | 0.48 | 0.40 | 0.41 | 0.35 | 0.30 | 0.48 | 0.55 | 0.62 | 0.63 | ||||||||||||||
| Subprime (%) | 3.74 | 4.58 | 5.16 | 5.10 | 5.02 | 5.30 | 3.75 | 3.60 | 5.64 | 6.03 | 5.98 | 5.90 | ||||||||||||||
| Subprime modified (%)(ii) | N/A | 3.89 | 3.99 | 3.77 | 3.48 | 3.82 | 2.76 | 2.38 | 4.03 | 4.96 | 5.37 | 5.24 | ||||||||||||||
| (i)Represents 60-plus-day delinquencies. (ii)Excludes three large deep subprime issuers: American Credit Acceptance, Exeter. N/A--Not applicable. | ||||||||||||||||||||||||||
Chart 3
Auto Loan ABS Rating Activity/Revised Loss Expectations
In August, we reviewed our loss expectations on 13 transactions: two were revised upward, nine downward, and two maintained. The two transactions with upward revised expected cumulative net losses were United Auto Credit Securitization Trust 2022-2 and SFS Auto Receivables Securitization Trust 2023-1.
Table 4
| Surveillance actions | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Rating action (by class) | ECNL (no. of transactions) | |||||||||||||||||||||||
| Issuer | Transactions reviewed | Upgrades | Downgrades | Affirmations | CreditWatch | Removed from Credit Watch | CreditWatch extended | Increased | Decreased | Maintained | ||||||||||||||
| Prime | ||||||||||||||||||||||||
| 9/12/2024 | GFCART | 10 | 8 | -- | 36 | -- | -- | -- | -- | 9 | 1 | |||||||||||||
| 9/23/2024 | SFAST | 1 | -- | -- | 6 | -- | -- | -- | 1 | -- | -- | |||||||||||||
| Subprime | ||||||||||||||||||||||||
| 9/19/2024 | FCAT | 1 | -- | 2 | 3 | -- | -- | -- | -- | -- | 1 | |||||||||||||
| 9/19/2024 | UACST | 1 | 1 | 1 | 1 | -- | -- | -- | 1 | -- | -- | |||||||||||||
| Total | 13 | 9 | 3 | 46 | 0 | 0 | 0 | 2 | 9 | 2 | ||||||||||||||
| GFCART--GM Financial Consumer Automobile Receivables Trust. SFAST--SFS Auto Receivables Securitization Trust. FCAT--Flagship Credit Auto Trust. UACST--United Auto Credit Securitization Trust. ECNLs--Expected cumulative net losses. | ||||||||||||||||||||||||
Our reviews in September resulted in nine upgrades, three downgrades, and 46 affirmations. Year-to-date through Sept. 30, 2024, there were 182 upgrades and 11 downgrades on U.S. auto loan ABS. The three downgrades included: Flagship Credit Auto Trust 2022-2's classes D and E to 'B- (sf)' and 'CC (sf)', respectively, from 'B (sf)' and 'CCC (sf)'; and United Auto Credit Securitization Trust 2022-2's class E to 'CC (sf)' from 'CCC (sf)'.
Table 5
| Historical ratings activity--U.S. auto loan ABS | ||||||
|---|---|---|---|---|---|---|
| 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 | 416 | 6 | ||||
| 2023 | 396 | 6 | ||||
| 2024(i) | 182 | 11 | ||||
| Total | 3,528 | 38 | ||||
| (i)As of Sept. 30, 2024. ABS--Asset-backed securities. | ||||||
Table 6
| Historical ratings activity--Canadian ABS auto loan ABS | ||||||
|---|---|---|---|---|---|---|
| Period | Upgrades | Downgrades | ||||
| 2021 | 8 | 0 | ||||
| 2022 | 3 | 0 | ||||
| 2023 | 2 | 0 | ||||
| 2024(i) | 0 | 0 | ||||
| Total | 13 | 0 | ||||
| (i)As of Sept. 30, 2024. ABS--Asset-backed securities. | ||||||
Table 7
| GM Financial Consumer Automobile Receivables Trust | ||||||||
|---|---|---|---|---|---|---|---|---|
| Series | Original lifetime CNL exp. | Prior revised lifetime CNL exp.(ii) | Revised lifetime CNL exp.(ii) | |||||
| 2020-4 | 1.40-1.60 | 0.30 | Up to 0.30 | |||||
| 2021-1 | 1.40-1.60 | 0.35 | Up to 0.30 | |||||
| 2021-3 | 1.10-1.30 | 0.45 | 0.40 | |||||
| 2021-4 | 1.10-1.30 | 0.50 | 0.40 | |||||
| 2022-1 | 1.10-1.30 | 0.65 | 0.45 | |||||
| 2022-2 | 1.10-1.30 | 0.75 | 0.60 | |||||
| 2022-4 | 1.10-1.30 | 0.95 | 0.75 | |||||
| 2023-2 | 1.20 | N/A | 0.90 | |||||
| 2023-3 | 1.20 | N/A | 1.00 | |||||
| 2023-4 | 1.20 | N/A | 1.00 | |||||
| (i)As of the August 2024 distribution date. (ii)Previously revised in December 2023 for all series under review, apart from series 2023-2, 2023-3, and 2023-4. CNL--Cumulative net loss. CNL exp.--Cumulative net loss expectations. N/A--Not applicable. | ||||||||
Table 8
| Flagship Credit Auto Trust | ||||||||
|---|---|---|---|---|---|---|---|---|
| Series | Original lifetime CNL exp. | Prior revised lifetime CNL exp.(i) | Revised lifetime CNL exp.(ii) | |||||
| 2022-2 | 11.50-12.00 | 22.00(i) | 22.00(ii) | |||||
| (i)Revised in July 2024. (ii)Revised as of the collection period ended Aug. 31, 2024. CNL exp.--Cumulative net loss expectations. | ||||||||
Table 9
| United Auto Credit Securitization Trust | ||||||||
|---|---|---|---|---|---|---|---|---|
| Series | Original lifetime CNL exp. | Previous revised lifetime CNL exp.(i) | Revised lifetime CNL exp.(i) | |||||
| 2022-2 | 20.25 | 31.50 | 32.50 | |||||
| (i)As of the September 2024 distribution date. CNL exp.--Cumulative net loss expectations. | ||||||||
Table 10
| SFS Auto Receivables Securitization Trust | ||||||
|---|---|---|---|---|---|---|
| Series | Original lifetime CNL exp. | Revised lifetime CNL exp. | ||||
| 2023-1 | 3.00 | 3.25 | ||||
| (i)As of September 2024. CNL exp.--Cumulative net loss expectations. | ||||||
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 (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. 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 cumulative net losses (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 America's Car-Mart, 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 detailing the weighting of issuers in our prime and subprime composites and indices, see "U.S. Auto Loan ABS Tracker: June 2023 Performance," published Aug. 15, 2023, and "U.S. Auto Loan ABS Tracker: Full-year and December 2023 Performance," published Feb. 13, 2024.
Related Research
- Credit Conditions North America Q4 2024: Set For Improvement – With Eyes On The Election, Sept. 25, 2024
- Economic Outlook U.S. Q4 2024: Growth And Rates Start Shifting To Neutral, Sept. 24, 2024
- Six SFS Auto Receivables Securitization Trust 2023-1 Ratings Affirmed, Sept. 23, 2024
- Two Ratings Lowered And Three Affirmed From Flagship Credit Auto Trust 2022-2, Sept. 19, 2024
- One Rating Lowered, One Raised, And One Affirmed On United Auto Credit Securitization Trust 2022-2, Sept. 19, 2024
- Eight Ratings Raised, 36 Affirmed From 10 GM Financial Consumer Automobile Receivables Trust Transactions, Sept. 12, 2024
- Looking Back, Looking Forward: Lessons On U.S. Subprime Auto Loan ABS Performance, Aug. 20, 2024
- Electric Shock: How Engine Technology Affects Auto ABS Risk, July 10, 2024
- Seniority Has Its Privileges: Some 2022 Subprime Auto ABS Senior Classes Upgraded Despite Weaker Collateral Performance, July 12, 2023
- Scenario Analysis: The Potential Impact Of A Recession On Prime Auto Loan ABS Ratings, April 12, 2023
- How The Next Downturn Could Affect U.S. Subprime Auto Loan ABS Ratings, Dec. 8, 2022
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: | Veerbhadrappa Umbargi, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
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