Consumers under stress … people with low FICO scores, especially those who finance used vehicles for more than the value of those vehicles

By Bill Ploog

The 2023 vs. 2019 charts below were created using loan-level data submitted monthly to the SEC by lenders with U.S. publicly offered auto asset-backed securities (ABS). 2019 is used for a pre-pandemic comparison to 2023.

As of 30-Jan-2024, 16 of 17 lenders with U.S. publicly offered auto loan ABS submitted their Dec-2023 loan level detail to the SEC. The lenders are listed at end of this article.

Over the two periods (Jan to Dec-2019, and Jan to Dec-2023), the monthly count of auto loans ranged from approximately five to seven million (up to $125 billion in outstanding principal). As of the end of Dec-2023, 7.0 million loans ($125 billion) were outstanding. Vast majority (68%) originated between 2021 and 2023.

6.2 million (89%) of 7.0 million loans outstanding at end of Dec-2023 include a credit score, in the loan-level detail submitted to the SEC. The loans are segmented into five groups based on credit score: 1) Deep Subprime, 2) Subprime, 3) Nonprime, 4) Prime and 5) Super Prime. Collectively, Deep Subprime, Subprime and Nonprime are called Below Prime; and, Prime and Super Prime are called Prime & Above.

Pie Chart below shows distribution of the 6.2 million auto loans among the five credit score buckets, split between new and used vehicles.

Two Area Chart below reflect trend from Dec-2019 to Dec-2023 for Below Prime and Prime & Above buckets of auto loans. Below Prime accounts are under substantially more stress than in 2019, up 15% (392 bp) … Prime & Above accounts under stress are up 9% (31 bp) vs. 2019.

Five Charts below reflect delinquency frequency for accounts 60+ days past due.

Chart below shows the % 60+ DPD delinquency rate for Below Prime used vehicles, based on loan-to-value (LTV) ranges (<=100% and >100%)… it shows that high LTVs add another layered risk to Below Prime, used vehicle accounts.

Chart below shows the number of charge-offs and percent of charge-offs not involving repossessions (all risk categories).

Chart below created using Fitch U.S. auto loan subprime data (not same dataset used for rest of this report). Dec-2023 subprime 60+ delinquency was at a 17-year high. Further, ten of 12 months in 2023 set 17-year highs for 60+ delinquency. In terms of annualized net losses, Dec-2023 was near the pre-pandemic level, and the fifth highest in the last 17 years.

Punchline: As with all past articles, over the past year or so, for Below Prime auto loans, especially the Deep Subprime and Subprime buckets, delinquency remains a serious concern. Prudent lenders continually search for ways to mitigate delinquencies / losses … and support positions with facts.

The publicly offered ABS include the following banks, finance companies, and manufacturer captives: Ally, CarMax, Carvana, Capital One, Exeter, Fifth-Third, Ford, GM, Honda, Hyundai, Mercedes-Benz, Nissan, Santander, Toyota, Volkswagen, World-Omni. Excludes BMW due to their continual tardiness in submitting loan level detail within one month of month-end.