Subprime auto engine check: The ABS Angle

Research evidence excerpt

Subprime auto engine check: The ABS Angle

FICC Research

Securitised Credit

22 June 2026

The ABS Angle

Subprime auto engine check

On net, the macroeconomic backdrop should be supportive

for consumer credit, including for auto loan ABS. However,

pockets of weakness at the margin argue for selectivity Elana Lipchak +1 212 526 9882

among subprime sponsors and within the capital stack. elana.lipchak@barclays.com

BCI, US

In Focus: Subprime auto engine check

From our standpoint, the US consumer appears to be in fair shape, and stabilization in

cumulative net loss curves for recent vintages of auto loan ABS is an encouraging sign. We prefer

AAA rated subprime auto loan ABS for the incremental spread of approximately 34bp (near the

five-year median). However, credit weakness at the margins argues for selectivity among

platforms within the subprime auto loan ABS market. Also, compression of the credit curve

leads us to prefer single-A rated and above tranches of subprime auto rather than reaching

deeper down the capital stack.

The macroeconomic data paint a fairly benign picture for consumer credit, overall. On the

positive side, the unemployment rate is expected to be relatively stable, consumer spending

continues to surprise to the upside, lenders have kept underwriting standards stable after a

period of tightening, and debt service coverage remains below pre-pandemic levels. In

addition, while overall delinquency rates for consumer debt remain in elevated territory, newly

delinquent balances seem to have reached a downward inflection point. Recent declines in real

wage growth, especially for low-income consumers, warrant monitoring. Moreover, persistently

higher gas prices are more likely to constrain low-income consumers, but the potential for a US-