S&P Global Ratings highlighted positive trends for net losses, recoveries and delinquency in connection with the U.S. auto ABS sector’s performance for the first quarter

According to the report shared with SubPrime Auto Finance News, subprime net losses decreased month-over-month to 4.10% in March from 5.22% in February. But as expected analysts expected, the reading rose over the record low March 2021 level of 3.03% in 2021, “which benefited from COVID-related stimulus payments in December 2020 and March 2021.

Even with the increase, S&P Global Ratings said in the report that subprime losses remained 42% lower than the March 2019 level of 7.11%.

Analysts indicated prime net losses also decreased month-over-month to 0.17% in March from 0.25% in February but were higher year-over-year from 0.13% in March.

S&P Global Ratings determined prime losses remained 68% lower than the March 2019 pre-COVID-19 pandemic rate of 0.54%.

Looking next at recoveries, S&P Global Ratings indicated subprime recoveries improved to 63.59% in March from 49.85% in February but landed slightly below the “historically” high level of 64.76% recorded last March. The latest reading also represented a noted rise from the March 2020 rate of 39.46%.

Analysts mentioned prime recoveries increased to 81.40% in March from 74.41% in February but settled below “extremely elevated levels” of 91.24% recorded last March,

Furthermore, S&P Global Ratings said the subprime 60-day delinquency rate fell to 3.82% in March from 4.43% in February. Analysts acknowledged the newest delinquency rate moved higher from the “very low level” of 2.65% spotted last March.

Even with the year-over-year increase, S&P Global Ratings pointed out that subprime delinquencies still remain slightly below the March 2019 pre-pandemic rate of 4.34%.

In the prime space, analysts noted the 60-day delinquency rate fell to 0.33% in March from 0.39% in February, but ticked up from 0.23% in March of last year. S&P Global Ratings said prime delinquencies now are close to the pre-COVID-19 level of 0.34% recorded in March 2019.

“The collateral characteristics of loans securitized during the first quarter of 2022 appear comparable to the first quarter of 2021, except loan terms continue to lengthen in the prime segment, and the annual percentage rates are rising on subprime loans to reflect the issuers' rising ABS funding costs,” S&P Global Ratings said in a news release.

“March’s performance received a seasonal boost from tax refunds and extremely strong recovery rates, which were approximately one-third higher than March 2019. Losses were down month over month and up slightly year over year, but still remained significantly below pre-pandemic levels,” analysts continued.

“Recovery rates rose significantly month over month and were down slightly from year-ago levels, but comparisons to last year will be difficult given the rapid ascent in used vehicle values last year and spring/summer recovery rates that exceeded 100% for prime and 70% for subprime,” S&P Global Ratings went on to say.

S&P Global Ratings also mentioned that aided by tax refunds, extensions declined in March to their lowest levels since last May.

Analysts said prime extensions declined to 0.29%, down from 0.30% in February and 0.34% a year earlier. Similarly, analysts indicated subprime extensions dropped to 1.87% from 2.62% in February and 2.21% in the prior year.

“Although we’re concerned that the consumer may have difficulty meeting their financial commitments given inflationary pressures and higher interest rates, we’re not currently seeing such stress in the extension numbers, often an early warn sign,” S&P Global Ratings said in the report.

“We believe that continued low levels of unemployment and continued access to credit should help to offset these budgetary concerns,” analysts went on to say in the report that can be downloaded via this website.