Delinquencies, net losses, and prepayments moved higher on a month-over-month (MoM) and year-over-year (YoY) basis in KBRA’s Prime and Non-Prime Auto Loan ABS Indices in August. Meanwhile, recovery rates improved MoM and YoY in our prime index but weakened further in our non-prime index (see Figure 9 and Figure 10). The table below presents current index values as well as MoM and YoY changes.
Although the MoM rise in annualized net losses and delinquencies aligns with seasonal patterns (as summer travel and vacation spending strain consumer finances), we note that the non-prime net loss rate and the 60+ day delinquency rate remain at their highest level in August since 2017 (see Figure 4 and Figure 8). Net loss and delinquency rates are expected to rise through year-end, following seasonal trends. Prepayment speeds are expected to increase in the coming months and over the longer term, largely driven by increased refinancing opportunities as interest rates are expected to continue…