U.S. Auto Loan ABS Tracker: Full-Year And December 2023 Performance

Pent-up demand for auto vehicles drove retail sales up 13% year over year to 15.5 million units in 2023 and catapulted U.S. auto loan asset-backed securities (ABS) issuance volume approximately 33% to a record $120 billion (see chart 1). The previous record was $103 billion in 2005. The captive segment saw the most accelerated issuance volume, followed by the bank and credit union segment. However, collateral performance weakened in 2023, with the degree of deterioration diverging between prime and subprime pools. In the prime segment, losses rose though cumulative net losses (CNLs) on the 2022 pools generally remained in line or were lower than those on the 2016-2017 pools (the most recent vintages that were at most slightly affected by

...- U.S. auto loan ABS issuance rose to a record $120 billion in 2023, led by a 13% increase in retail auto sales. We expect issuance to grow to $125 billion in 2024 due to banks' and credit unions' increased appetite for securitization. - Collateral performance deteriorated in 2023 with the prime and subprime segments reporting record high delinquencies and historically low recoveries, though vintage loss performance diverged. For the 2022 vintage, most prime issuers continued to report losses that were in line with historical levels (albeit higher than for the 2020-2021 pools, which benefited from COVID-19-related stimulus) while most subprime issuers recorded losses that exceeded 2016's levels. - Although credit metrics worsened, rating actions remained largely positive with 396 upgrades and six downgrades (all subprime). There would have been more downgrades and greater severity had certain issuers not supported their transactions with more credit enhancement. - We expect losses to continue...

Commentary