CHAPTER 5
Auto Asset-Backed Securities
Glenn M. Schultz, CFA
Senior Analyst
Wachovia Capital Markets, LLC
John N. McElravey, CFA
Senior Analyst
Wachovia Capital Markets, LLC
Shane Whitworth, CFA
Associate Analyst
Wachovia Capital Markets, LLC
Erin K. Walsh
Associate Analyst
Wachovia Capital Markets, LLC
Auto loan asset-backed securities (ABS), which were introduced in 1985, have seen a steady growth in issuance over the years. This continual growth can be attributed to the evolution in the auto finance market as securitization has proven to be an attractive method of funding new loans for many auto lenders.
This chapter serves as a guide to understanding the characteristics of auto ABS and valuation. In addition, we provide subprime, near prime, and prime delinquency, and loss performance indexes. Because of the different legal nature of auto leases, we highlight the unique securitization challenges for these transactions.
ISSUANCE
Auto loans and leases are one of the mainstays of the ABS market. Americans love their cars. U.S. domestic auto sales have been running between 16 million and 17 million units annually since 1999, providing the ABS market with a steady stream of collateral to securitize. The auto ABS market began with securitizations of auto loans from prime quality borrowers, which were originated primarily by the captive finance arms of large automakers.
In the mid- to late 1990s, deals backed by loans from near prime and subprime borrowers, as well as auto leases, ...
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