NEW YORK — Fitch Ratings reported this week that prime
annualized net losses crept up 3 percent in August above July's level, showing
much less of an increase during this historically weaker period.

Further, analysts highlighted that used-vehicle values were
strong in August, not typical for this month to help to contain loss severity
on defaulted loans.

Fitch indicated prime 60-day delinquencies came in at 0.33
percent in August, unchanged from July, and 10.8 percent lower year-over-year.
The firm tabulated that 60-day delinquencies in the prime space have averaged
0.34 percent in 2013, down from 0.39 percent in 2012.

"As with losses, delinquencies continue to be low
historically entering the weaker fall months," analysts said.

Fitch determined prime annualized net losses stood at 0.32
percent in August, just one basis point higher than July. The firm pointed out
that August's rate was 28 percent higher year-over-yeear but still remains low
historically.

Analysts mentioned prime cumulative net losses were 0.26
percent for August, 3.7 percent lower month-over-month and 18.8 percent lower
year-over-year.

"The 2013 cumulative net loss vintage is producing the best
annual vintage performance to date," Fitch said.

Turning over to the subprime sector, analysts highlighted
that 60-day delinquencies were stable month-over-month, coming in at 3.21
percent. That level represented only 2.6-percent rise above July while staying
virtually unchanged year-over-year.

Fitch acknowledged that subprime annualized net losses did
jump 18.4 percent month-over-month to 5.27 percent in August, but were 1.0
percent below the level recorded in August of last year.

While some softening occurred since the summer and into
fall, Fitch noted the wholesale vehicle market unexpectedly picked up speed in
August with values rising over July.

The firm recapped that the Manheim Used Vehicle Market Index
stood at 122.3 at the end of August, increasing for the third consecutive month
this year which analysts said "is not a normal pattern as typically used prices
slow during this time of the year.

"Strong demand for cheaper late-model vehicles, high new-vehicle
pricing and low inventories are all supporting the strength of used vehicle
values currently," they continued.

"Further, the gradually improving economy, including the
stronger housing and jobs markets, continue to buoy demand for both new and
used vehicles in the U.S.," analysts went on to say.

According to Fitch, strengthening wholesale vehicle market values
helped bolster asset values and overall performance year-to-date 2013, keeping
a lid on loss severity and loss rates.

"Despite current strong values, Fitch does expect used
vehicle values to retreat over the next year as used-vehicle supply rises
driven by several factors, including increasing off-lease vehicle returns,"
analysts said.

The firm wrapped up its latest update by mentioning the
outlook for asset performance is stable in 2013 while the rating outlook is
positive.

Fitch upgraded 28 outstanding classes of prime auto ABS
notes in 2013 year-to-date, compared to 24 upgrades issued in 2012 during the same
period.

"Fitch expects the rate of positive rating actions to
continue through December, and overall be stronger this year than in 2012," analysts
said.

Fitch's prime and subprime auto ABS indices are comprised of
$67.3 billion of outstanding notes issued from 127 outstanding transactions. Of
this amount, 68 percent comprise prime auto loan ABS and the remaining 32
percent subprime ABS.

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