DBRS Morningstar’s Subprime Auto Loan ABS Sector Outlook—Negative Amid Coronavirus

Because of the ongoing impact of the Coronavirus Disease (COVID-19) on the U.S. economy and on borrowers’ abilities and willingness to repay outstanding debts, our outlook on the subprime auto loan asset-backed securities(ABS) sector is negative.The coronavirus pandemic has had an adverse effect on the subprime auto loan sector. With the closure of many nonessential businesses across the U.S., jobless claims have exceeded 30 million over the last six weeks ended April 25, 2020. We expect obligor credit deterioration, particularly for weaker credit obligors, as performance on subprime auto loans is highly correlated with the unemployment rate.