Auto loan-backed securities (albs), Financial Management

The issuers of ALBS are the financial subsidiaries of automobile manufacturers, commercial banks and other independent finance companies and small financial institutions specializing in auto loans. The period of loan typically varies from 3 years to 6 years.

Cash Flows and Prepayments

The cash flow for auto loans includes interest payment, principal repayment payable at regular intervals and any prepayments. Prepayments may be due to:

  1. Re-acquisition followed by resale of the automobile

  2. Loss or destruction of the vehicle

  3. An attempt to save interest cost

  4. An attempt to refinance the loan at a lower interest cost.

Prepayment due to re-acquisition followed by resale of the automobile depends on the prevailing economic conditions. During economic recession, prepayments tend to increase. Prepayment due to refinancing is not common in automobile loans. The speed at which prepayments are made in ALBS is measured in terms of the Absolute Prepayment Speed (APS).

Payment Structure

The structure of auto loan backed deals can be either of pass-through or pay-through type.

Posted Date: 9/8/2012 9:13:17 AM | Location : United States







Related Discussions:- Auto loan-backed securities (albs), Assignment Help, Ask Question on Auto loan-backed securities (albs), Get Answer, Expert's Help, Auto loan-backed securities (albs) Discussions

Write discussion on Auto loan-backed securities (albs)
Your posts are moderated
Related Questions
Define the Explicit cost of capital Explicit cost of retained earnings that involve no future flows to or from firm is minus 100 per cent. This must not tempt one to infer that

a)   What are the pre-requisites of installation of responsibility accounting system? b)  Diffrence between 'cost centre' and 'profit centre'.

State the objectives of Corporate financial Corporate financial objectives could be to: 1. Provide the link between business and the other entities in environmentand 2.

In indexed bonds, the principal and coupon payments are linked to the market index like inflation and price index. Index bonds are attractive to investors

Issuance Calendar Issuance calendar gives clear and timely information about the borrowing program of the government. It clearly conveys the maturity profile of outstanding sto

a)  Tonddu plc is expected to report record earnings of £120m next year.  It has grown rapidly over the last few years, the growth has been achieved by maintaining a high level of

the importance of a balanced capital structure and the problems which are associated with high levels of gearing

An average should be: (a) vigorously defined, (b) easy to compute, (c) capable of simple interpretation, (d) dependent on all the observed values, (e) not unduly influenced by one

SUGGESTION REGARDING CREDIT LIMIT. SHOULD IT BE APPROVED OR NOT, WHAT SHOULD BE THE AMOUNT OF CREDIT LIMIT THAT ELECTRONICS GIVE TO BOOTH PLASTICS

Evaluation of change in credit policy Current average collection period = 30 + 10 = 40 days Current accounts receivable = 6m × 40/ 365 = $657534 The Average collection pe