Global auto ABS risks on an upward trend

THE expiry of loan payment moratoriums in the United States and renewed global lockdowns is expected to increase auto loan asset-backed securities (ABS) delinquency and default risks in the near future, according to Moody’s Investor Service.

“Auto loan delinquency rates increased globally in auto ABS markets in the first half of 2020, with the exception of the US which was shielded by loan extensions,” said Moody’s vice president and senior analyst Kan Leung.

“Although delinquency rates have since improved in many markets, they will rise again in many countries as support measures end and some lockdowns resume,” he added.

In its recent report, it showed that the increasing COVID-19 cases and renewed lockdowns in some major countries in Europe will cloud economic recovery and pressure auto loan borrowers.

For the US, delinquencies have increased since June when support measures started to expire. Moody’s expects delinquency rates to continue to increase in coming months for prime auto ABS.

Some weaker borrowers whose loans were extended by lenders will struggle to meet repayments and some borrowers whose loans lenders did not extend at the onset of the pandemic will have trouble servicing debt.

Meanwhile in Asia Pacific, auto ABS performance will be stable in China and Japan, but worsen in Australia given the ongoing economic fallout from the coronavirus and the end of lender and government support measures in coming months. – Nov 21, 2020

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