DBRS Assigns Provisional Ratings to Credit Acceptance Auto Loan Trust 2019-1

DBRS, Inc. (DBRS) assigned provisional ratings to the following classes of notes to be issued by Credit Acceptance Auto Loan Trust 2019-1 (CAALT 2019-1 or the Issuer):

-- $247,200,000 Class A Notes rated AAA (sf)
-- $83,200,000 Class B Notes rated AA (sf)
-- $72,100,000 Class C Notes rated A (sf)

The ratings are based on DBRS’s review of the following analytical considerations:

-- Transaction capital structure, ratings, and form and sufficiency of available credit enhancement.
-- Credit enhancement will be in the form of overcollateralization (OC), subordination, amounts held in the reserve account and excess spread. Credit enhancement levels are sufficient to support DBRS’s expected cumulative net loss assumptions under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested. For this transaction, the rating addresses the payment of timely interest on a monthly basis and principal by the final scheduled distribution date.
-- CAALT 2019-1 provides for coverage multiples for each class of Notes consistent with DBRS’s criteria in this asset class.
-- The transaction includes triggers intended to maintain the credit quality of the collateral during the revolving period and to test whether actual collections are consistent with forecasted collections.
-- The transaction parties’ capabilities with regard to originations, underwriting and servicing.
-- Credit Acceptance Corporation (CAC) has a long and successful track record of achieving consistent loan performance in varying economic and competitive environments. The senior management team has also spent a significant amount of time with CAC.
-- DBRS performed an operational risk review of CAC and deemed the company to be an acceptable originator and servicer.
-- Wells Fargo Bank, N.A. (Wells Fargo; rated AA and R-1 (high) with Stable trends by DBRS) is an experienced auto loan servicer and is the backup servicer on this transaction. Wells Fargo receives a monthly data file and reconciles the data with the servicing certificate to maintain the accuracy of the servicing reports.
-- Review of the legal structure and presence of legal opinions, which address the true sale of the assets to the Issuer, the non-consolidation of the Issuer with CAC, that the trust has a valid first-priority security interest in the collateral and consistency with DBRS’s “Legal Criteria for U.S. Structured Finance” methodology.

The transaction represents the 36th securitization by CAC since 1998. The collateral consists of dealer advances as well as purchased consumer notes.

Class A Notes credit enhancement as a percentage of the performing consumer notes principal balance will be 64.50% and will consist of OC of 40.25%, subordination of 23.05% and the 1.20% reserve account.

Class B Notes credit enhancement as a percentage of the performing consumer notes principal balance will be 52.15% and will consist of OC of 40.25%, subordination of 10.70% and the 1.20% reserve account.

Class C Notes credit enhancement as a percentage of the performing consumer notes principal balance will be 41.45% and will consist of OC of 40.25% and the 1.20% reserve account.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Retail Auto Loan Securitizations, which can be found on dbrs.com under Methodologies & Criteria.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrs.com.

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