Fitch Predicts Difficult Times Ahead for U.S. Dealer Floor Plan ABS
NEW YORK and CHICAGO — The weakened U.S. economy, declining dealership profitability impacted by a stressed U.S. vehicle sales environment and the weak credit profiles of U.S. auto manufacturers will lead to worsening asset performance of U.S. auto-related dealer floor plan asset-backed securities during second half of 2008, according to Fitch Ratings.
Dealer floor plan ABS, including those supported by auto-related receivables, has performed within expectations through the second quarter of this year 2008 in spite of increased concerns, which resulted in rating affirmations on all outstanding dealer floor plan ABS transactions, said officials citing Fitch's recently completed comprehensive portfolio review.
However, Ravi Gupta, senior director, indicated that the expected continued financial weakness of U.S. auto manufacturers and dealers may begin to manifest itself in a declining asset performance outlook of auto-related dealer floor plan ABS.
Particular stress may be experienced in monthly payment rates for these transactions as an already weak new-vehicle sales environment may be further impacted by the expected curtailments in retail vehicle lease financing programs offered by captive finance companies.
"Rating volatility in the auto-related dealer floor plan sector also has the potential to increase in the second half of this year," said Gupta. "In contrast, diversified floor plan, or non-auto related, receivables are expected to continue to demonstrate rating stability despite weakness related to the softening U.S. economy," he added.
Fitch conducts its dealer floor plan ABS review annually, in addition to ongoing monthly transaction surveillance.