Key Takeaways
- U.S. ABS auto loan performance in November was mixed, with subprime annualized losses declining month over month, the first decline since April 2023, while prime losses rose. In addition, recovery rates for both sectors dropped substantially, and delinquencies continued to weaken.
- November's prime and subprime recovery rates of 49.26% and 36.80% were the lowest November levels since 2008.
- Delinquencies (60-plus-day) ticked up to the highest November level since 2010 for prime and highest ever November level for subprime (although the month-to-month increases were minimal).
- In November, we revised our expected cumulative net loss levels for 36 transactions, raised 44 ratings, affirmed 87, and placed two on CreditWatch negative.
U.S. auto loan ABS performance was mixed for November 2023, with subprime annualized losses finally declining after rising for six consecutive months. Recovery rates, however, declined month over month, year over year, and relative to November 2019 and, in fact, were at their lowest since November 2008. Delinquencies also continued to worsen, reaching the highest November level since 2010 for prime and ever for subprime.
Losses Rose Month-Over-Month For Prime But Finally Retreated For Subprime
Prime annualized net losses increased month over month to 0.67% in November 2023 from 0.64% in October 2023 and year over year from 0.45% in November 2022. With this increase, prime losses are on par with November 2019's pre-COVID-19 pandemic level of 0.67%.
However subprime annualized net losses decreased month over month to 8.86% in November 2023 from 9.37% in October 2023 (an approximate 5.35% of decrease). Even with the decrease, the first in seven months, subprime losses remained higher than the 8.37% of a year ago and are nearly in line with November 2019's 8.80%. The month-to-month decline in the annualized net losses resulted from a few factors: Many of the subprime issuer's 2022 transactions experienced lower losses month over month; the 2022 vintage, which has higher-than-historical losses, declined slightly as a percentage of the composite as the 2023 vintage, which is performing better, is becoming a larger share; and some of the loss improvement came at the expense of higher extensions. Santander Drive Auto Receivables Trust (Santander), Drive Auto Receivables Trust (Drive), Prestige Auto Receivables Trust (Prestige), Carvana Auto Receivables Trust (Carvana), and American Credit Acceptance Receivables Trust (ACAR) were the major contributors to lower subprime losses in November, accounting for 43.00% of the subprime index in November 2023. However, some of Santander's loss improvement came at the expense of slightly higher extensions (which increased to 1.71% in November from 1.67% in October).
After netting out the three large deep subprime issuers, modified subprime annualized losses decreased to 7.68% in November 2023 from 8.12% in October 2023 but rose relative to November 2022's 6.70%. The modified subprime composite reported higher average losses in November 2023 than November 2019. This demonstrates that the deterioration in subprime performance isn't confined to only the deep subprime issuers; other subprime lenders are also struggling with higher-than-pre-pandemic loss levels, particularly in their 2022 securitizations.
Table 1
| Net Loss Rate Composite(i) | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nov-09 | Nov-14 | Nov-15 | Nov-16 | Nov-17 | Nov-18 | Nov-19 | Nov-20 | Nov-21 | Nov-22 | Oct-23 | Nov-23 | |||||||||||||||
| Prime (%) | 1.59 | 0.46 | 0.51 | 0.64 | 0.65 | 0.58 | 0.67 | 0.40 | 0.33 | 0.45 | 0.64 | 0.67 | ||||||||||||||
| Subprime (%)(ii) | 10.13 | 7.86 | 8.78 | 9.70 | 8.84 | 9.34 | 8.80 | 4.88 | 4.57 | 8.37 | 9.37 | 8.86 | ||||||||||||||
| Subprime modified (%) | N/A | 7.20 | 7.64 | 7.40 | 7.16 | 7.08 | 6.59 | 3.76 | 3.41 | 6.70 | 8.12 | 7.68 | ||||||||||||||
| (i)Represents monthly annualized losses. (ii)Three large deep subprime issuers--American Credit Acceptance, Exeter, and DRIVE--are excluded. N/A--Not applicable. | ||||||||||||||||||||||||||
Chart 1
Recoveries Declined For The Sixth Consecutive Month
Recoveries have declined every month since June 2023 for both the prime and subprime segments. Prime recoveries declined to 49.26% in November 2023 month over month from 51.10% in October 2023 and year over year from 66.49% in November 2022. Additionally, recovery rates were also lower than the November 2019 level of 53.52% (approximately 8.00% lower) and were even lower than November 2009's level 49.73%.
Similarly, subprime recoveries declined in November 2023 to 36.80% from 37.99% in October 2023 and from 39.13% in November 2022. Further, the recovery rate declined compared to the pre-pandemic November 2019 level of 38.81% and was at its lowest level since November 2008 (31.27%).
While the Manheim Used Vehicle Value Index remains well above pre-pandemic levels, recovery rates on auto loan ABS in aggregate are below pre-pandemic levels. We attribute part of this to most of the defaults coming from the 2022 vintages, whose underlying vehicles were purchased in late 2021 and 2022 when new vehicle prices peaked as dealers added market-based premiums to offset vehicle shortages. The subsequent price declines, due to improved vehicle supply, has been particularly harsh for the 2022 vintages. Additionally, repossession expenses are higher, leading to lower net recovery rates, and some lenders are citing more full charge-offs due to the longer lag in liquidations given the shortage of repossession agents and influx of vehicles awaiting repossession.
Table 2
| Recovery rate composite(i) | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nov-09 | Nov-14 | Nov-15 | Nov-16 | Nov-17 | Nov-18 | Nov-19 | Nov-20 | Nov-21 | Nov-22 | Oct-23 | Nov-23 | |||||||||||||||
| Prime (%) | 49.73 | 59.68 | 60.13 | 55.14 | 51.16 | 56.56 | 53.52 | 69.32 | 72.41 | 66.49 | 51.10 | 49.26 | ||||||||||||||
| Subprime (%) | 40.62 | 40.27 | 37.77 | 37.39 | 37.38 | 37.86 | 38.81 | 49.00 | 50.07 | 39.13 | 37.99 | 36.80 | ||||||||||||||
| Subprime modified (%)(ii) | N/A | 40.83 | 38.64 | 38.60 | 37.91 | 38.61 | 38.27 | 49.14 | 51.73 | 38.28 | 37.88 | 36.86 | ||||||||||||||
| (i)Represents monthly recovery rates. (ii)Three large deep subprime issuers--American Credit Acceptance, Exeter, and DRIVE--are excluded. N/A--Not applicable. | ||||||||||||||||||||||||||
Chart 2
Delinquencies Ticked Up To Record Levels
The prime 60-plus-day delinquency rate increased to 0.60% in November 2023 from 0.56% in October 2023 and from 0.51% in November 2022. This was also up from 0.45% for November 2019. Additionally, it was the highest November level since 2010.
The subprime 60-plus-day delinquency rate also rose slightly to 6.06% in November 2023 from 6.03% in October 2023 and 5.76% of November 2022. Also, delinquencies remained higher than the November 2019 pre-pandemic level of 5.41%, representing the highest November level ever.
We attribute these rising delinquencies to consumers facing financial stress from inflationary pressures (including higher auto and home insurance premiums), the fading benefit of COVID-19-related support, and growth in originations that came at the expense of credit quality. In addition, in the subprime segment there is a greater mix of companies that focus on lower-quality/lower-income obligors than in the earlier years of our composite.
Table 3
| 60-Plus-Day Delinquency Rate Composite(i) | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nov-09 | Nov-14 | Nov-15 | Nov-16 | Nov-17 | Nov-18 | Nov-19 | Nov-20 | Nov-21 | Nov-22 | Oct-23 | Nov-23 | |||||||||||||||
| Prime (%) | 0.73 | 0.44 | 0.48 | 0.48 | 0.45 | 0.42 | 0.45 | 0.36 | 0.40 | 0.51 | 0.56 | 0.60 | ||||||||||||||
| Subprime (%) | 5.07 | 4.66 | 4.93 | 5.40 | 5.23 | 5.49 | 5.41 | 4.04 | 4.41 | 5.76 | 6.03 | 6.06 | ||||||||||||||
| Subprime modified (%)(ii) | N/A | 4.05 | 4.15 | 4.09 | 3.75 | 3.90 | 3.91 | 2.90 | 2.91 | 4.29 | 5.04 | 5.07 | ||||||||||||||
| (i)Represents 60+ day delinquencies. (ii)Three large deep subprime issuers--American Credit Acceptance, Exeter, and DRIVE--are excluded. N/A--Not applicable. | ||||||||||||||||||||||||||
Chart 3
Auto Loan ABS Rating Activity/Revised Loss Expectations
In December 2023 we reviewed 36 transactions, and we revised our loss expectations downward for 28, upward for three (all GLS Auto Receivables Issuer Trust [GLS] transactions), maintained them for three (two Ally transactions and one GLS), and opted to forego revising them at such time on two GLS transactions that we put on CreditWatch negative (see table 4).
Table 4
| Surveillance actions | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Rating actions (by class) | Expected cumulative net losses (no. of transactions) | |||||||||||||||||||
| Issuer | Date | Transactions reviewed | Upgrades | Downgrades | CreditWatch | Affirmations | Increased | Decreased | Maintained | |||||||||||
| Prime | ||||||||||||||||||||
| PAROT | 12/5/2023 | 1 | 3 | 3 | 1 | |||||||||||||||
| WOART | 12/13/2023 | 11 | 11 | 35 | 11 | |||||||||||||||
| AART | 12/18/2023 | 2 | 1 | 11 | 2 | |||||||||||||||
| GMCAR | 12/18/2023 | 8 | 8 | 26 | 8 | |||||||||||||||
| Subprime | ||||||||||||||||||||
| GCAR | 12/7/2023 | 14 | 21 | 2 | 12 | 3 | 8 | 1 | ||||||||||||
| Total | 36 | 44 | 0 | 2 | 87 | 3 | 28 | 3 | ||||||||||||
| PAROT--PenFed Auto Receivables Owner Trust. WOART--World Omni Auto Receivables Trust. AART--Ally Auto Receivables Trust. GMCAR--GM Financial Consumer Automobile Receivables Trust. GCAR--GLS Auto Receivables Issuer Trust. | ||||||||||||||||||||
December's analysis resulted in 44 upgrades, 87 affirmations, no downgrades, and the placement of two ratings on CreditWatch negative across two transactions--one class from GLS 2022-2 and one class from GLS 2022-3. Both classes are the most subordinated classes.
The performance for both GLS 2022-2 and GLS 2022-3 are trending worse than our original expected cumulative net loss (ECNL). Cumulative gross losses for both series are significantly higher than prior GLS series at similar months of performance, which, coupled with lower cumulative recoveries, are resulting in elevated CNLs. For series 2022-2, we observed that the transaction's overcollateralization amount was below its specified target for the August, September, October, and November performance months. Although series 2022-3 was at its target overcollateralization as of the November 2023 performance month, its performance is trending similarly to series 2022-2's, and continued elevated net losses pose a risk to its target overcollateralization.
Year-to-date through Dec. 31, U.S. auto loan ABS-related upgrades and downgrades total 396 and six, respectively.
Table 5
| Historical ratings activity--U.S. ABS auto loans | ||||||
|---|---|---|---|---|---|---|
| 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(i) | 396 | 6 | ||||
| Total | 3,346 | 27 | ||||
| (i)As of Dec. 31, 2023. | ||||||
Table 6
| Historical ratings activity--Canadian ABS auto loans | ||||||
|---|---|---|---|---|---|---|
| Period | Upgrades | Downgrades | ||||
| 2021 | 8 | 0 | ||||
| 2022 | 3 | 0 | ||||
| 2023(i) | 2 | 0 | ||||
| Total | 13 | 0 | ||||
| (i)As of Dec. 31, 2023. | ||||||
Table 7
| PenFed Auto Receivables Owner Trust | ||||||
|---|---|---|---|---|---|---|
| Series | Original lifetime CNL exp. | Revised lifetime CNL exp. | ||||
| 2022-A | 1.40-1.60 | 0.70 | ||||
| CNL exp.--Cumulative net loss expectations. | ||||||
Table 8
| GLS Auto Receivables Issuer Trust | ||||||||
|---|---|---|---|---|---|---|---|---|
| Series | Original lifetime CNL exp. | Prior lifetime CNL exp.(i) | Revised CNL exp. (ii) | |||||
| 2019-2 | 19.25-20.25 | 12.50 | up to 12.00 | |||||
| 2019-3 | 19.25-20.25 | 12.00 | 11.50 | |||||
| 2019-4 | 18.50-19.50 | 11.75 | 10.50 | |||||
| 2020-1 | 18.50-19.50 | 11.75 | 10.50 | |||||
| 2020-2 | 21.50-22.50 | 11.75 | 10.75 | |||||
| 2020-3 | 21.50-22.50 | 11.75 | 9.25 | |||||
| 2020-4 | 21.25-22.25 | 11.75 | 9.50 | |||||
| 2021-1 | 19.50-20.50 | 12.75 | 11.25 | |||||
| 2021-2 | 19.00-20.00 | 13.50 | 13.50 | |||||
| 2021-3 | 16.75-17.75 | 14.50 | 15.00 | |||||
| 2021-4 | 16.75-17.25 | 16.00 | 16.50 | |||||
| 2022-1 | 16.25-17.25 | 17.50 | 18.00 | |||||
| 2022-2 | 16.25-17.25 | N/A | N/A(iii) | |||||
| 2022-3 | 16.25-17.25 | N/A | N/A(iii) | |||||
| (i)Revised in October 2022 for all series except for 2021-1, which was revised in August 2022, and 2021-4 and 2022-1, which were revised in April 2023. (ii)As of the November 2023 distribution date. (iii)Will be revised when we resolve the CreditWatch placement and have sufficient data to project future losses more accurately. CNL exp.--Cumulative net loss expectations. N/A–-Not applicable. | ||||||||
Table 9
| World Omni Auto Receivables Trust | ||||||||
|---|---|---|---|---|---|---|---|---|
| Series | Original lifetime CNL exp. | Prior lifetime CNL exp.(i) | Revised lifetime CNL exp.(ii) | |||||
| 2020-A | 1.30-1.50 | 0.85 | Up to 0.65 | |||||
| 2020-B | 1.80-2.00 | 0.70 | Up to 0.30 | |||||
| 2020-C | 1.80-2.00 | 0.85 | Up to 0.40 | |||||
| 2021-A | 1.80-2.00 | 1.00 | 0.55 | |||||
| 2021-B | 1.55-1.75 | 1.10 | 0.60 | |||||
| 2021-C | 1.40-1.60 | 1.10 | 0.70 | |||||
| 2021-D | 1.40-1.60 | 1.15 | 0.75 | |||||
| 2022-A | 1.35-1.55 | 1.15 | 0.90 | |||||
| 2022-B | 1.30-1.50 | 1.20 | 0.95 | |||||
| 2022-C | 1.30-1.50 | 1.30 | 1.10 | |||||
| 2022-D | 1.40 | N/A | 1.20 | |||||
| (i)Revised as of December 2022 for 2020-A through 2021-D and as of July 2023 for 2022-A through 2022-C. (ii)Revised as of December 2023. CNL exp.--Cumulative net loss expectations. N/A–-Not applicable. | ||||||||
Table 10
| Ally Auto Receivables Trust | ||||||||
|---|---|---|---|---|---|---|---|---|
| Series | Initial lifetime CNL exp. | Former lifetime CNL exp. | Revised lifetime CNL exp. | |||||
| 2022-3 | 1.05-1.15 | N/A | 1.10 | |||||
| 2022-4 | 1.05-1.15 | N/A | 1.10 | |||||
| CNL exp.--Cumulative net loss expectations. N/A–-Not applicable. | ||||||||
Table 11
| GM Financial Consumer Automobile Receivables Trust | ||||||||
|---|---|---|---|---|---|---|---|---|
| Series | Original lifetime CNL exp. | Former lifetime CNL exp.(i) | Revised lifetime CNL exp.(ii) | |||||
| 2020-2 | 1.30-1.50 | Up to 0.45 | Up to 0.35 | |||||
| 2020-4 | 1.40-1.60 | 0.65 | Up to 0.30 | |||||
| 2021-1 | 1.40-1.60 | 0.65 | 0.35 | |||||
| 2021-3 | 1.10-1.30 | 0.80 | 0.45 | |||||
| 2021-4 | 1.10-1.30 | 0.80 | 0.50 | |||||
| 2021-1 | 1.10-1.30 | 0.85 | 0.65 | |||||
| 2021-2 | 1.10-1.30 | 0.90 | 0.75 | |||||
| 2021-4 | 1.10-1.30 | N/A | 0.95 | |||||
| (i)Previously revised in November 2022. (ii)As of the November 2023 distribution date. CNL exp.--Cumulative net loss expectations. N/A--Not applicable. | ||||||||
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 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 and subprime composites and indices, see "U.S. Auto Loan ABS Tracker: June 2023 Performance," published Aug. 15, 2023.
Related Research
- Various Rating Actions Taken On 34 Classes From Eight GM Financial Consumer Automobile Receivables Trust Transactions, Dec. 18, 2023
- One Rating Raised, 11 Ratings Affirmed On Two Ally Auto Receivables Trust Transactions, Dec. 18, 2023
- Eleven Ratings Raised And 35 Affirmed From 11 World Omni Auto Receivables Trust Transactions, Dec. 13, 2023
- U.S. Auto Loan ABS Tracker: October 2023 Performance, Dec. 12, 2023
- Various Rating Actions Taken On 14 GLS Auto Receivables Issuer Trust Transactions, Dec. 7, 2023
- Three Ratings Raised And Three Affirmed From PenFed Auto Receivables Owner Trust 2022-A, Dec. 5, 2023
- 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: | Manali Kithani, CRISIL Global Analytical Center, an S&P affiliate, Mumbai |
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