February remittance reports showed that non-prime 60+ day delinquency rates (DQ) improved during the January collection period, falling 14 basis points (bps) month-over-month (MoM) to 5.74%, while prime DQ rates were flat. Early-stage DQs (30-59 days) also showed improvement during the month, dropping 8 bps and 63 bps MoM to 1.09% and 8.56%, respectively. The decline in DQs was likely driven by seasonal tailwinds, as borrowers receive tax refunds and have lower cash outlays following year-end holiday spending, providing an additional source of cash to help catch up on past due payments (see Figure 1 and Figure 2).
Meanwhile, annualized net losses (ANL) in our prime and non-prime indices climbed 4 bps and 18 bps MoM, respectively. While used vehicle prices, as measured by the Manheim Used Vehicle Value Index, rose in January1 (and also February), recovery rates fell (see Figure 9 and Figure 10), as loans defaulting today were likely made 12-15…