Although the ultimate scope and breadth of changes in U.S. trade policy remains uncertain, the broad implementation of tariffs could pose headwinds to credit fundamentals across various securitized asset classes.1 However, auto loan ABS credit fundamentals may enjoy some benefit—at least in the short term—as rising vehicle prices boost liquidation proceeds on repossessed vehicles, leading to higher recovery rates and lower net losses across outstanding securitized auto loan collateral pools.
Key Takeaways
- U.S. auto loan ABS recovery rates are at their lowest levels since the global financial crisis (GFC), with prime auto loan ABS recoveries averaging 52.6% and non-prime recoveries averaging 38.2% in 2024.
- Tariffs should result in higher used vehicle values and increased liquidation proceeds on repossessed vehicles, leading to a meaningful improvement in auto loan ABS recovery rates from current levels.
- Higher recovery rates…