Press Release

Strong Used Vehicle Values Provide a Buffer to a Range of Entities Impacted by the Coronavirus

Non-Bank Financial Institutions
December 01, 2020

DBRS, Inc. (DBRS Morningstar) published a commentary analyzing the rebound of used vehicle values following an unprecedented decline in April 2020. Used vehicle values have returned quicker and stronger than anticipated providing a buffer for auto finance companies, rental car companies, banks, and commercial fleet lessors against other Coronavirus Disease (COVID-19) related pressures.

Key highlights include:

-- The J.D. Power Used Vehicle Value Index declined record 13.2% from the prior month in April 2020. This was more than double the previous record decline recorded at the height of the 2008 Financial Crisis.
-- Used vehicle values recovered through the summer with record increases in May and June 2020 as low interest rates, government stimulus, and a shift amongst consumers from commuting by mass transit to self-driving supported demand for used vehicles.
-- Auto finance companies and rental car companies earnings in 3Q20 were underpinned by strong gains on the sale of used vehicles.

“The strong recovery in used vehicle values since April 2020 has exceeded DBRS Morningstar's expectations and is a positive for the credit profile for those entities we cover with exposure to the residual values of vehicles,” notes David Laterza, Senior Vice President. “However, as we enter 2021, we expect used vehicle values to decline in the mid-single digit range as new vehicle inventory is expected to normalize, used vehicle inventory expands from a higher supply of off-lease vehicles and the labor market recovery is likely to be uneven until a vaccine is widely available in mid-2021.”

Notes:
The commentary is available at www.dbrsmorningstar.com.

For more information, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS, Inc.
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