OREANDA-NEWS. Much has been said about the recent 20-year high U.S. subprime auto ABS delinquencies reached back in February, though Fitch Ratings says that rising delinquencies are not the concern foremost on the minds of investors.

Instead, chief among their concerns is the quickening pace of new deals among the newer, less-established names in the space and the subsequent intensifying competition. Investors have also expressed concerns over the ability of some of these newer independent finance companies to fund their servicing platforms, how they are adhering to their own underwriting policies, and how they can respond to the rigors of regulatory scrutiny inherent in today's environment.

While the recent 20-year high in subprime auto delinquencies merits close watch, it's important to note that this number is a fraction of the total number of subprime auto loans being originated. That said, much of the weaker subprime auto ABS performance stems from many of these newer players who have never securitized prior to the last couple of years.

In fact, the most established subprime auto originators (Americredit and Santander- the only subprime auto issuers currently rated by Fitch) make up less than half of Fitch's subprime auto ABS index today (compared to over 90% back in 2009-2010). The remainder (nearly 60%) of the composition emanates from these newer companies, many of which have to rely on ABS more exclusively for their funding as opposed to the more established lenders. What's more, these companies are and will continue to compete in the weaker end of the subprime market as competition intensifies. This coupled with a softening wholesale market will contribute to higher subprime auto losses in the coming months.