Origination Report: Consumer Unsecured, December 2024

Originations: Stability in Consumer Unsecured, Shifts in Auto Lending Trends

Note: dv01’s Auto analysis is based on Reg AB II data from EDGAR and focuses on loans seasoned 3-12 months before securitization, with origination figures subject to upward revisions as new securitizations are created. Loan-level securitizations historically represent only 9-14% of total Auto originations, and market stresses in 2022 and 2023 further reduced securitized volumes, with declines in overall Auto originations observed since Q2-2022. While securitization volumes increased in early 2023, they primarily involved seasoned loans from 2021-2022, reflecting increased issuer disclosures rather than a rise in new loan originations.

Quick Insights

• Consumer Unsecured: December originations typically fall 5% MoM, but remained flat this year. Looking longer-term, originations rose 65% YoY, although this is partially exaggerated given the weak 2023 issuance.

  • GWAC: GWAC declined across all grades in December, with the steepest drop in Bottom Grades, likely due to issuer concentration differences rather than a repricing of weaker credit.

  • GWAC Differences: GWAC differences across income ranges have collapsed in recent years, with spreads between the highest and lowest income buckets now 250 bps below pre-COVID levels and 120 bps below early 2023 levels.

• Subprime Auto: Auto loans originated in securitizations peaked in March 2021 at $9.2 billion, coinciding with peak issuance in Q4-2021/Q1-2022, but has since declined due to fewer securitizations overall. As of Q3-2023, origination volumes were 12% higher than Q3-2019 levels but 10% below 2018 levels on a dollar basis, with loan count figures showing a 6% increase over Q3-2019 but an 18% decline compared to 2018.

  • Income: Income trends, stable pre-COVID, declined in 2021, surged in early 2023, and then dropped noticeably in Q2 and Q3 2023, diverging from consumer unsecured trends and FICO score changes. This decline likely reflects a shift toward more used vehicle purchases and a slowdown in used car price increases since 2023.