This Toxic Trifecta for Auto Loans is Fueling #Carmageddon

Jon Banking

Subprime Auto-Loan Backed Securities from 2015 on track to be Worst Ever.
Institutional investors that manage other people’s money grabbed subprime auto-loan backed securities because of their slightly higher yields. These bonds are backed by subprime auto loans that have been sliced and diced and repackaged and stamped with high credit ratings. But those issued in 2015 may end up the worst performing ever in the history of auto-loan securitizations, Fitch warned.
And then there are those issued in 2016. They haven’t had time to curdle.
The 2015 vintage that Fitch rates is now experiencing cumulative net losses projected to reach 15%, exceeding the peak loss rates during the Financial Crisis.
Fitch Ratings’ Auto Loan Annualized Net Loss Index shows the strong seasonality, with either May or June forming the low point each year and the winter months forming the peaks. A terrible trend took off in 2014. The winter peak last year occurred in November with a net annualized loss of 10.9%. The latest data point is for April, at 7.8%, up from 7.4% last year. The index peaked in February 2009 at 13.1%. The trend is pointing that way (via Fitch Ratings ABS):

This post was published at Wolf Street on Jun 13, 2017.