NEW YORK — Fitch Ratings indicated performance of U.S. auto
ABS continues to exceed expectations even in a time of the year when
performance is weakest.

Analysts determined annualized net losses were flat for
prime auto loan ABS in September.

"A major factor is the used vehicle market's somewhat
unusual resiliency," Fitch said. "Used-vehicle values typically begin to soften
as summer comes to a close and endure its weakest period during the fall
months. However, this has not been the case this year.

An unexpected bounce in used vehicle values last month
supported higher recovery rates, contained loss levels and supported auto ABS
asset performance," analysts continued.

"Subprime auto ABS losses are likely to rise as the year
comes to a close, though asset performance should remain within expectations
going into 2014," the firm went on to say.

Fitch highlighted positive rating actions issued in 2013
surpassed the level recorded in 2012.

The firm upgraded 35 outstanding classes of prime auto loan
ABS notes this year. This amount represents a 40-percent jump from the 25
upgrades issued in 2012.

"We expect this positive trend to continue into 2014, given
current asset performance and low loss rates currently tracking below initial
expectations," analysts said.

Fitch noticed prime 60-day delinquencies ticked up to 0.36
percent in September, a 9-percent increase month-over-month, but a 7.7-percent
drop compared to 2012.

Analysts said annualized net losses were unchanged at 0.32
percent last month, a level 14 percent higher year-over-year.

"However, the rise was only due to near-record losses in
September last year," they said.

In the subprime sector, Fitch reported that 60-day
delinquencies stood at 3.45 percent in September. This level represented a
7.5-percent increase compared to August but the rate is virtually unchanged
versus a year ago.

Analysts pointed out the subprime annualized net losses
index unexpectedly declined 8 percent month-over-month in September to 4.84
percent, a reading also 14 percent below year-ago levels.

"The decline in losses was primarily driven by a sale of
charged-off post-bankruptcy accounts undertaken by a single issuer, and the
proceeds from the sale benefitting the trusts," Fitch said.

The firm also mentioned used-vehicle pricing was solid in
September as values rose nearly 2 percent versus September of last year. The
Manheim Used Vehicle Value Index crept up to 122.8 in September, the fourth
consecutive increase in the index.

"Despite the unusual fall strength, Fitch expects used
vehicle values to soften through the end of 2013. Used vehicle supply gradually
ticks up driven by higher trade-in and off-lease return volume," analysts said.

Fitch's auto loan ABS indices total $67.2 billion of
outstanding notes, of which 68 percent or $45.44 billion comprises prime auto
loan ABS, and the remaining 32 percent is non-prime auto loan ABS.

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