Sub-prime auto loans “stable”

Sub-prime auto loan delinquencies and losses have edged up, but performance should be stable this year, and the loans are performing as expected, according to a Fitch Ratings report on activity in the first three months of the year.

The proportion of subprime auto loans packaged into securities that are delinquent by 60 days or more increased to 3.56% in the first quarter, up from 2.8% in the same period a year ago. Annualized net losses came in at 6.58%, up from 4.96%.

Fitch analysts expect losses to increase “marginally” in 2015 due to softer used-car prices and easier loan approvals for the balance of the year. But overall, the ratings agency says it expects auto loan performance to be relatively stable for the year.

For prime-risk loans, delinquencies of 60 or more days were 0.33% in the first quarter, much the same as the same quarter in 2014 (0.31%). Net losses were 0.40%, up from 0.31% in the first quarter of 2014.

For both the prime and sub-prime auto leasing sector, Fitch identified the key challenges as a possible interest rate increase, plus lower prices on used cars, which would mean lenders recovering less on repossessions. On the plus side, low gasoline prices and low unemployment mean consumers are more likely to be able to make repayments as scheduled.