Auto Loans Weaken in July: Moody’s

The credit performance of both prime and subprime auto loans declined in July, according to two reports from the Structured Finance group of Moody’s Investors Service. 

Prime auto loans saw worsening loss rates in July compared with June and with July of 2006, according to the “Prime Auto Loan Credit Indexes” report from Moody’s analyst Rakesh Arora. 

The net loss rate in the prime portfolio was 0.79 percent in July, up 58 percent from 0.50 percent in July of 2006, and up 20 percent from 0.66 percent in June of 2007, according to Moody’s. 

The 60-day delinquency rate for prime auto loans rose to 0.49 percent, a 30 percent increase from 0.38 percent a year ago, and up from 0.46 percent in June of 2007. 

Arora noted, however, that 2006 was “an extremely strong year for prime auto performance as nine out of twelve months recorded their historic low levels for net loss rate index for each such respective month.” 

Moody’s Aggregate Prime Auto Index measures the average credit performance of the pools of prime quality loans backing all rated securities. There is no uniform definition for “prime” quality loans. Most banks and thrifts regularly finance prime quality loans. 

In the subprime auto loan category, the chargeoff market indexes got worse for the second month in a row, according to the “U.S. Subprime Auto Loan Indexes” report by Moody’s analyst Zoe (Jinyang) Wang.  

Moody’s all-pools market index rose in July to a cumulative chargeoff rate of around 6.42 percent, up from 6.34 percent in June, and a rise from 6.24 percent in July of 2006, Wang found. 

Moody's Subprime Auto Chargeoff Indexes currently track cumulative net chargeoff rates, adjusted for the effects of seasoning, for 101 loan pools backing securitizations totaling $80.7 billion at issuance. Of the total, 20 issues representing approximately $17.9 billion are low-loss pools with lifetime expected cumulative net losses of less than 6%. The rest of the pools are high-loss pools with expected cumulative lifetime net losses ranging between 6% and 25%.