U.S. auto loan asset-backed securities (ABS) delinquency and loss rates weakened month over month and year over year in October as they returned to higher, more normalized levels. However, they remained significantly below the October 2019 pre-pandemic levels. Prime and subprime recoveries continued to decline in October but were approximately 35% and 27%, respectively, above the October 2019 levels.

S&P Global Ratings is currently requesting comments on its proposed methodology and assumptions for assessing the credit quality of consumer auto ABS (see "Comments Requested On Proposed Methodology And Assumptions For Rating Global Auto ABS," published Nov. 30, 2021). On Friday, Dec. 10, 2021, 11:00 am Eastern, we will host a live webinar and Q&A on the "Proposed Global Auto ABS Criteria And Its Application In U.S. and Canada."

Prime And Subprime Losses Increased

Prime net losses almost doubled month over month to 0.33% in October from 0.17% in September, which is more in-line with the 0.30% recorded in October 2020. However, losses remained far below the 0.67% recorded in 2019 and the five-year average of 0.61%.

Subprime losses increased to 4.40% in October from 4.11% in September and 3.83% in October 2020--but were well below the 9.22% reported in October 2019 (see table 1 and chart 1). We believe losses are returning to more normalized levels.

Table 1

Chart 1

Prime And Subprime Recoveries Slide

Prime recoveries fell to 73.39% in October from 88.69% in September and 74.49% in October 2020. Meanwhile, subprime recoveries dipped marginally to 50.44% in October from 52.01% in September and 57.05% in October 2020. October's prime and subprime recoveries are approximately 35% and 27% higher, respectively, than the October 2019 levels (see table 2 and chart 2).

Table 2

Chart 2

S&P Global Ratings assumes recovery rates will revert to historical levels when determining its expected cumulative net loss (ECNL) levels.

Delinquencies Increased, But Are Still Lower Than Pre-Pandemic Levels

The prime 60-plus-day delinquency rate increased to 0.38% in October from 0.31% in September and 0.32% in October 2020. However, it remained below the 0.43% recorded in October 2019 (see table 3 and chart 3). The subprime 60-plus-day delinquency rate rose to 3.85% in October from 3.69% in September and 3.53% in October 2020. However, it too remained well below the 5.22% recorded in October 2019.

Table 3

Chart 3

We expect delinquencies to rise further, but at a moderate pace, as we approach the seasonal high point at year end. We also expect the expiration of enhanced unemployment payments, the removal of COVID-related accommodations (such as foreclosure/eviction moratoriums and student loan forbearance), and consumers' return to more normal spending patterns will likely bring delinquencies in line with historical levels sometime next year.

144a Subprime Extension Rates Fell To Pre-Pandemic Levels

144a subprime extension rates dropped three basis points to 3.97% in October from 4.00% in September (see tables 4-5 and chart 4). This remains generally in line with the 3.88% recorded in October 2019 and significantly below the 9.76% peak reached in April 2020.

Table 4

Extensions (%)
	Subprime extensions--Reg AB II issuers (%)
Oct-19	3.88
Jan-20	4.48
Feb-20	3.38
Mar-20	6.24
Apr-20	9.76
May-20	5.95
Jun-20	3.45
Jul-20	3.08
Aug-20	3.13
Sep-20	3.54
Oct-20	3.84
Nov-20	4.29
Dec-20	5.00
Jan-21	4.11
Feb-21	3.31
Mar-21	2.65
Apr-21	2.05
May-21	2.96
Jun-21	3.46
Jul-21	3.94
Aug-21	4.08
Sep-21	4.00
Oct-21	3.97
Note: Data missing for November and December 2019.

Chart 4

Table 5

Of the 12 144a subprime issuers in our dataset, seven (ACA, Avid, DriveTime, Flagship, GLS, Prestige, and Tidewater) reported higher month-over-month extension levels in October. DriveTime's extensions were the highest followed by Exeter and Westlake. It should be noted that DriveTime's series 2021-2 and prior transactions are reported on an account basis, which overstates their extensions relative to the other issuers'. Beginning with the series 2021-3 transaction, DriveTime has been reporting extensions on a dollar basis. CPS saw a decline of nearly 37%, while Avid reported a sizeable increase in its deferrals relative to the October 2019 levels. This increase was due to the 2018-1 series being called, which resulted in a smaller denominator relative to the remaining extensions and, thus, a higher extension rate.

We did not include extensions for the public shelves this month but plan to include them in our next Reg AB II loan-level report.

Auto Loan ABS Rating Activity/Revised Loss Expectations

In November, we revised our loss expectations and took the following rating actions:

• We raised 35 ratings and affirmed nine ratings from 11 American Credit Acceptance Receivables Trust transactions (see "Thirty-Five Ratings Raised And Nine Affirmed On 11 American Credit Acceptance Receivables Trust Deals," published Nov. 3, 2021).
• We raised 39 ratings and affirmed 19 ratings from 15 Flagship Credit Auto Trust transactions (see "Thirty-nine Ratings Raised And 19 Affirmed On 15 Flagship Credit Auto Trust Transactions," published Nov. 9, 2021).
• We raised nine ratings and affirmed four ratings from two Santander Consumer Auto Receivables Trust transactions (see "Nine Ratings Raised And Four Affirmed From Santander Consumer Auto Receivables Trust 2020-A And 2020-B," published Nov. 10, 2021).
• We raised 28 ratings and affirmed five ratings from 10 DT Auto Owner Trust transactions (see "DT Auto Owner Trust Ratings Raised On 28 Classes, Affirmed On Five From 10 Transactions," published Nov. 18, 2021).
• We raised four ratings from the Avid Automobile Receivables Trust 2019-1 transaction (see "Four Ratings Raised From Avid Automobile Receivables Trust 2019-1," published Nov. 19, 2021).

These rating actions resulted in 115 upgrades and 37 affirmations (see table 6).

Table 6

We lowered our ECNLs on all 39 transactions we reviewed in November (see tables 7-11).

Table 7

Table 8

Table 9

Table 10

Table 11

Appendix: 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 3.0% or less, average FICO scores of 700 or higher, and annual percentage rates (APRs) of 0.0%-5.0%.

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 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. We then 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. We then 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 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 Byrider Finance LLC (doing business as CarNow Acceptance Corp.), 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 of the transactions included in our prime, subprime, and modified subprime composites and indices, see "U.S. Auto Loan ABS Tracker: March 2019," published May 23, 2019. However, note that we subsequently added transactions rated by S&P Global Ratings that have since closed, most prime transactions that closed and were not rated by S&P Global Ratings from 2016 through the present, and most Santander Drive Auto Receivables Trust and AmeriCredit Automobile Receivables Trust transactions not rated by S&P Global Ratings.

Related Research

• Comments Requested On Proposed Methodology And Assumptions For Rating Global Auto ABS, Nov. 30, 2021
• Four Ratings Raised From Avid Automobile Receivables Trust 2019-1, Nov. 19, 2021
• DT Auto Owner Trust Ratings Raised On 28 Classes, Affirmed On Five From 10 Transactions, Nov. 18, 2021
• Nine Ratings Raised And Four Affirmed From Santander Consumer Auto Receivables Trust 2020-A And 2020-B, Nov. 10, 2021
• Thirty-nine Ratings Raised And 19 Affirmed On 15 Flagship Credit Auto Trust Transactions, Nov. 9, 2021
• Thirty-Five Ratings Raised And Nine Affirmed On 11 American Credit Acceptance Receivables Trust Deals, Nov. 3, 2021
• Economic Outlook U.S. Q4 2021: The Rocket Is Leveling Off, Sept. 24. 2021
• Auto Loan ABS COVID-19 Loss Adjustment Reassessed After Better-Than-Expected Performance, July 8, 2021
• U.S. Auto Loan ABS Tracker: March 2019, May 23, 2019