Looking Back, Looking Forward: Lessons On U.S. Subprime Auto Loan ABS Performance

This report explores the managed portfolio performance of subprime auto finance companies that have outstanding subprime auto loan asset-backed securities (ABS) rated by S&P Global Ratings. These metrics differ from vintage static pool data, in that portfolio data represents a dynamic collateral pool in which losses are assigned to the period in which they occur. In contrast, with vintage static pool data, losses are assigned to the period in which the loans were originated or securitized. Given that the peak loss period for auto loans is generally about nine to 18 months after origination, during periods of rapid growth, the losses associated with newly originated loans often don't materialize in the portfolio data for a year or more. Similarly, credit

...- In 2023, U.S. subprime auto loan ABS securitizers' managed portfolio delinquencies hit a record high and net losses rose 32%, reaching 2016 levels. - However, based on first-quarter 2024 data, these delinquencies appear to be stabilizing and the growth in losses seem to have moderated. - While the performance deterioration in 2023 reflects several factors, including rapid loan growth, the stabilization in delinquencies and losses in first-quarter 2024 is the lagged effect of the credit tightening many lenders started in the second half of 2022 through 2023. This report explores the managed portfolio performance of subprime auto finance companies that have outstanding subprime auto loan asset-backed securities (ABS) rated by S&P Global Ratings. These metrics differ from vintage static pool data, in that portfolio data represents a dynamic collateral pool in which losses are assigned to the period in which they occur. In contrast, with vintage static pool data, losses are assigned to the...

Commentary