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McLEAN, Va., and NEW YORK — As subprime auto lending gains
more steam — by as much as 20 percent in some instances — analysts from NADA
Used Car Guide and Fitch Ratings explained how the latest movements are
benefiting dealers and investors.

When it comes to moving new metal, Jonathan Banks, executive
automotive analyst with NADA Used Car Guide, recently noted that credit
availability to subprime buyers is up "by about 20 percent on the new-car side.

"This drives more people to dealerships. They're able to get
vehicles. They're able to trade in vehicles. And they're getting really low
interest rates," Banks noted during a recent episode of "AutoFocus with David
Hyatt," an online production of the National Automobile Dealers Association.

Meanwhile, when it comes to turning used models, Banks
emphasized, "We're finding this on the used-car market, as well.

"Financing is readily available, and interest rates are
better than they've ever been," he added.

Looking from the investor side of the equation, Fitch's
recent industry commentary mentioned that steady improvement in U.S. auto loan
asset quality continued in the second quarter, even as lending standards at
banks and captive finance companies eased somewhat and used-car values fell
slightly.

Fitch is expecting robust loan demand and good liquidity in
the capital markets to fuel further auto loan growth in the near term, "but
emerging competition, continued normalization of underwriting standards and
moderating used-car prices will likely lead to a modest weakening of credit
metrics over the next year."

Fitch recapped that the Federal Reserve's most recent senior
loan officer survey highlighted auto loans as an area where lenders have
reported some easing in credit standards during the past three months.

The Fed reported that 23 percent of banks surveyed loosened
application standards for individuals seeking auto financing over the last
quarter.

Survey respondents reporting eased credit terms noted that
most changes were occurring in loan pricing with 32 percent of banks noting
that auto loan spreads over the bank's cost of funds narrowed over the last
three months. Smaller fractions of lenders indicated that easing occurred in
loan maturities and down payment requirements.

"Auto lender credit metrics are likely to weaken somewhat
over the next year with further declines in used vehicle values and
normalization of credit trends," Fitch projected.

"However, metrics could deteriorate more quickly should
larger lenders respond to emerging competition in the auto finance space by
significantly loosening underwriting standards," analysts continued. "We would
view such developments negatively, but to date no evidence of a broad-based
change in underwriting standards has appeared.

"While some normalization of credit metrics is likely, we do
not expect auto lenders to report substantially weaker credit performance in
the back half of the year," Fitch officials went on to say.

Finally, a Reuters report pointed out that investors being
dubbed as "yield-starved" are moving toward products that incorporate more
risk, resulting in demand that is enabling companies that securitize subprime
auto receivables to achieve "super-low" funding costs.

The Reuters report mentioned Santander Consumer USA issued a
new deal with a weighted average credit spread of 1.329 and an all-in yield of
1.847 percent — what the account contended was the lowest yield achieved by any
subprime auto ABS issuer since the financial crisis.

"Auto ABS investors need yield that comes from an asset
class with improving credit metrics on top of a solid deal structure,"
independent portfolio manager Jim Harrington told Reuters.

"This subprime credit dynamic is occurring against the
backdrop of an ever-improving and growing auto consumer credit," Harrington
added.