From Bloomberg: Used car rush poised to cut auto loan recoveries, Moody’s says.
Recoveries on defaulted auto loans are poised to decline this year as an influx of used vehicles damps the value of collateral backing the debt, according to Moody’s Investors Service.
The rate of recoveries on soured car loans may fall to as low as 40 percent for those made to subprime borrowers, compared with an average of 50 percent since 2011, according to the New York-based ratings company. Lower recoveries mean holders of asset-backed bonds tied to the debt see less of their money returned.
“As the supply of used vehicles on the market grows, used car prices are going to soften,” Moody’s analyst Aron Bergman said in a report today. “The softening is going to trigger declines in recoveries in both prime and non-prime pools, even though they’ll remain high by historical norms.”
