Securitized Auto Delinquencies Improve Sequentially As Tax Refunds Roll In

Securitized auto loan delinquencies did tick down month over month in February as tax refund season started, but they remain historically elevated and risk indicators are still unfavorable for 2026 overall.

What’s happening in February

• Early tax refunds usually produce a seasonal improvement in auto ABS delinquencies as some borrowers catch up on past-due payments.

• February 2026 data from KBRA’s U.S. Auto Loan ABS indices show month‑over‑month credit improvement across securitized prime and non‑prime pools, consistent with that normal refund‑season pattern.

• Auto Finance News highlights that securitized auto delinquencies improved sequentially in February as refunds rolled in, but “levels remained elevated,” implying we are easing off a high plateau rather than returning to pre‑pandemic norms.

How elevated are delinquencies?

• Fitch recently reported that the 60‑day‑plus delinquency rate on subprime auto ABS hit a record 6.9% in January, underscoring how high the starting point was before the February improvement.

• Broader measures (all auto loans and leases, not just securitized) also show serious delinquencies above pre‑COVID levels, even though the pace of increase has slowed.

• TransUnion is projecting that serious auto delinquencies (60+ DPD) will edge up again in 2026 to around 1.54%, from roughly 1.51% at year‑end 2025, marking a fifth straight yearly increase albeit with smaller incremental rises.

Structural pressures vs. seasonal relief

• Seasonal relief from tax refunds is temporary; once refund flows normalize by late Q2, delinquency rates on weaker vintages tend to re‑widen as high payments and tight budgets reassert themselves.

• Recent vintage performance remains problematic: TransUnion’s analysis shows 2022–2023 auto cohorts with significantly worse delinquency ramps than 2019, particularly for loans originated at peak vehicle prices and high interest rates.

• Even as some lenders tightened underwriting in 2022–2024, other data (e.g., VantageScore) show auto delinquencies up more than 50% since 2010 and now among the riskiest major credit products, suggesting tax-season improvements do not yet signal a true cycle turn.

What this likely means for auto ABS investors and lenders

• For ABS investors, February’s improvement should be viewed as largely seasonal; forward‑looking commentary (e.g., Fitch) still expects higher auto ABS delinquencies in 2026 than in 2025, especially in subprime shelves.

• For whole‑loan lenders, portfolio‑level serious delinquency may stabilize or improve slightly in Q1–early Q2 due to refunds, but loss content from weak 2022–2023 vintages is likely to keep charge‑offs and repossessions elevated into 2027.

• In practice, that argues for maintaining conservative loss assumptions and funding spreads even if near‑term headline delinquency ratios look better through tax season.