Like March, U.S. auto loan asset-backed securities (ABS) annualized losses improved on a month-over-month basis depicting seasonal trends, notably the receipt of tax refunds, which consumers used to make auto loan payments. Nevertheless, losses increased year over year and remained elevated compared with the pre-pandemic levels of 2019. In addition, 60-plus-day delinquencies increased to the highest level for the month of April since 2009 for prime and ever for subprime, which doesn't bode well for future performance. However, certain subprime issuers that had reported significant deterioration in their 2022 transactions reported lower late payments year over year (see Delinquencies Deteriorated To Highest April Levels section). Recoveries improved month over month for prime, but were still slightly lower on a year-over-year basis and materially weaker than April 2019. Meanwhile subprime recoveries declined marginally for the month and remained over nine points lower than a year earlier.

Losses Depicted Seasonal Trends For Both Prime And Subprime

As we enter the second quarter, prime annualized net losses continued to improve month over month to 0.55% from 0.62% in March 2024, for the third consecutive month since February 2024. Like March, the improved losses depicted seasonal trends, largely due to tax refunds and improved recovery rates. Nevertheless, the losses increased year over year from 0.41% in April 2023 and are higher than the pre-pandemic level of 0.41% in April 2019. Similarly, for subprime, the losses decreased month over month to 7.30% from 7.55% in March 2024, but they remain higher than year-over-year level of 5.56% in April 2023 and the pre-pandemic level of 6.59% in April 2019.

The top three contributors to the month-over-month decline in the subprime losses were AmeriCredit Automobile Receivables Trust, Exeter Automobile Receivables Trust, and American Credit Acceptance Receivables Trust, accounting for approximately 28% of the subprime composite in April 2024.

After netting out the three large deep subprime issuers (Santander's DRIVE platform, Exeter, and American Credit Acceptance), modified subprime annualized losses decreased marginally to 6.51% in April 2024 from 6.55% in March 2024, and increased year on year from 5.00% in April 2023. Additionally, the losses are still higher than the pre-pandemic levels of 5.59% in April 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

Chart 1

Month-Over-Month Recoveries Improved For Prime And Declined For Subprime

Prime recoveries increased month over month to 63.64% in April 2024 from 59.88% in March 2024. Nevertheless, recovery rates were still lower than the April 2023 level of 65.90% and April 2019 level of 67.86%.

Subprime recoveries slightly declined to 43.91% in April 2024 from 44.56% in March 2024. Also, they are still substantially lower than the April 2023 level of 53.31% and the April 2019 level of 49.12%.

Table 2

Chart 2

Delinquencies Deteriorated To Highest April Levels

Delinquencies increased for both prime and subprime composites after declining month over month in March and are still higher than the April 2023 and pre-pandemic levels of April 2019. We are concerned about this trend as higher delinquencies indicate consumers are having a more difficult time juggling their financial obligations and this could be a harbinger of higher future defaults.

The prime 60-plus-day delinquency rate increased month over month to 0.53% in April 2024 from 0.51% in March 2024, and are still higher than the April 2023 level of 0.46% and pre-pandemic level of 0.36% in April 2019. Additionally, it has reached the highest April level since April 2009. Of the 20 prime issuers in our composite in both April 2024 and 2023, 17 reported year-over-year increases in late payments. Those reporting the highest basis point (bps) increases were used vehicle retailers. Also, certain credit unions and other new issuers that we've grouped in prime are reporting higher-than-average 60-plus-day delinquencies.

Similarly, subprime 60-plus-day delinquencies increased month over month to 5.31% in April 2024 from 5.19% in March 2024, and 4.77% in April 2023 and 4.33% in April 2019. In addition, the 60-plus-day delinquency rate has reached its highest ever April level. Of the 16 subprime issuers in our composite in both April 2024 and 2023, all but four reported year-over-year increases. The notable exceptions were American Credit Acceptance (delinquencies declined by 214 bps to an average of 6.75%), Exeter (decline of 59 bps to 8.35%), First Investors (decline of 38 aps 4.08%), and Prestige (decline of 14 bps to 5.28%).

Table 3

Chart 3

Auto Loan ABS Rating Activity/Revised Loss Expectations

In May 2024, we reviewed 18 transactions. We revised our loss expectations downwards for 10, upwards for five, and maintained the same for three.

Table 4

Overall, May's analysis resulted in 21 upgrades and 34 affirmations.

Year-to-date through May 31, U.S. auto loan ABS-related upgrades and downgrades total 54 and five, respectively.

Table 5

Table 6

Table 7

Table 8

Table 9

Table 10

Table 11

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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 detailing the weighting of issuers in our prime and subprime composites and indices, see "U.S. Auto Loan ABS Tracker: June 2023 Performance," published Aug. 15, 2023, and "U.S. Auto Loan ABS Tracker: Full-year and December 2023 Performance," published Feb. 13, 2024.

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• Seniority Has Its Privileges: Some 2022 Subprime Auto ABS Senior Classes Upgraded Despite Weaker Collateral Performance, July 12, 2023
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