Auto Finance Reaches Record Levels Featured
19 February 2018
Auto finance origination volume reached the highest level ever observed by Federal Reserve Bank of New York last year. Auto finance debt reached $1.22 trillion in 2017, up $64 billion from 2016. Auto debt levels increased by $8 billion in the fourth quarter. Auto finance balances have risen steadily since 2011. However, originations decreased slightly in the fourth quarter. The number of finance contracts becoming 90 days or more delinquent also decreased, to 2.3 percent from 2.4 percent in the third quarter. Another measure of consumer auto credit performance provides a less positive picture. After posting two consecutive months of improvement, annualized net losses and 60-plus day delinquencies in KBRA’s Non-Prime Index rose in January. This took place in the December collection period. The Kroll Index shows 60-plus day delinquencies increased to 5.25 percent. The increase in delinquency and loss rates was driven primarily by a shift in issuer composition. Santander’s deep-subprime arm, which exhibits some of the highest delinquency and loss rates in the nonprime market, accounted for 18 percent of the index in January, compared to 16 percent the previous month and 10 percent in January 2017. Elevated severity rates also played a role in driving net losses higher, with index severities rising to 61.9 percent in January, compared to 59.6 percent in December and 57.4 percent during the sameperiod last year. Performance in KBRA’s Prime Index also deteriorated in January. The increase in delinquency and loss rates in Kroll’s Prime Index were primarily driven by deteriorating collateral performance from CarMax and World Omni. Again, higher severities across most securitized prime auto loan pools contributed to the rise in net loss rates. The severity rate in Kroll’s Prime Index rose to 53.5 percent in January, compared to 49.1 percent the previous month and 50.4 percent one year ago. Kroll Rating Agency expects performance to improve in the spring as consumers receive their tax refunds.