NEW YORK — Fitch Ratings predicted this week that 2009 U.S. prime auto ABS loans should post lower-than-expected losses. As a result, the firm believes lenders are positioning themselves for continued positive rating performance as the broader economy slowly improves.

Through the first three quarters of this year, Fitch expects cumulative net losses on 2009 auto ABS loans to settle twice as low either 2008 or 2007 performances. Analysts think 2009 loans losses could finish at 1.3 to 1.5 percent. In the other two years mentioned, the losses came in at 2.8 to 3.0 percent.

Fitch contends the strong results come amid a slow start to the U.S. economic recovery and lingering fears of a double-dip recession. The firm maintains a positive rating outlook for 2009 auto ABS loans.

Analysts went on to explain cumulative net losses for 2009 are more likely to wind up akin to pre-recessionary time frames, such as 2005 and 2006. Director Brad Sohl emphasized that numerous factors are driving the better-than-expected performance, but he does not expect future prime auto loan ABS credit enhancement to drop materially from 2010 levels, which are down from those of 2009.

"The wholesale vehicle market has improved significantly and job losses are slowing," Sohl stated.

"Most importantly, the stronger credit quality and tighter underwriting of 2009 loans were an about-face from the loan attributes that worsened 2007 and 2008 vintage auto ABS performance," he continued.

Fitch went on to mention that it expects performance to stay largely positive even in the face of high unemployment.

"Future auto ABS performance remains susceptible to a potential double-dip recession and new job losses," Sohl conceded.

Fitch's complete report "In Reverse: Losses on 2009 Vintage Auto Loan ABS Revert to Pre-Recession Levels" is available at www.fitchratings.com.