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March 5, 2010

Fitch downplays concerns about auto loan losses

The recession has seen an alarming increase in defaults throughout many different credit sectors, including mortgages, credit cards and auto loans.

However, a recent announcement from Fitch Ratings suggests that things aren't as bad as some may have feared when it comes to auto loans and the asset-backed securities market that helps lenders extend credit to consumers.

The credit rating company said that despite the likelihood that delinquencies will remain high in the short-term because of ongoing economic difficulties, this problem is likely to be offset by other factors, including strength in the used car market.

Fitch noted that along with its greater affordability, the used vehicle market is further benefiting from cuts in manufacturing activity and a decline in lease volumes, such as from institutional and corporate customers.

Looking ahead, the health of the auto industry is likely to remain tied to the ability of more consumers to secure favorable borrowing terms with sufficient credit scores. This has been painfully difficult for many of them in an economy with an unemployment rate hovering around the 10 percent mark.
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