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

Ask an Expert

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

Write your message here..

Related Questions

Cost principle - accounting principle, Cost Principle - Accounting Principl... Cost Principle - Accounting Principle According to this principle all the non-monetary assets of the business are display in the books of accounts at the historical cost that

"a" round financing, "A" Round Financing "A" Round Financing is the fir... "A" Round Financing "A" Round Financing is the first main round of business financing through private equity investors or venture capitalists. In private equity investing, an "

WACC, Saven Travel Corporation is considering several investment opportunit... Saven Travel Corporation is considering several investment opportunities in order to diversify its operations. Mr. Saven, president, is trying to determine the firm''''s cost of ca

305, I have an assignment due today and needs some help I have an assignment due today and needs some help

State the advantages of ias 14 risk and return approach, IAS 14 "risk and r... IAS 14 "risk and return approach" Advantages Highlights the profitability, risk and returns of each segment. Information is more comparable with other entities.

Amount of the total liabilities, A firm has net working capital of -$800. L... A firm has net working capital of -$800. Long-term debt is $15,400, total assets are $24,800 and fixed assets are $19,100. What is the amount of the total liabilities.

Interpretations of short term solvency or liquidity ratio''s, Short Term So... Short Term Solvency or Liquidity Ratio's   CR:          The Current Ratio is calculated by current assets to current liabilities and is the index of company's financial stab

182-day t-bills, 182-Day T-Bills Following the Sukhamoy Chakravarty Com... 182-Day T-Bills Following the Sukhamoy Chakravarty Committee recommendations, in November, 1986, 182-day T-bills were introduced in order to develop the short-term money market

Write down budget constraint - budget line, You have $20 to spend on high q... You have $20 to spend on high quality pens and low quality pens. High quality pens cost $5 each and low quality pens cost $2 each.    (a) Suppose that you will spend your entire

Fiancial management, Ashok is to receive an amount of Rs. 15,00,000 from hi... Ashok is to receive an amount of Rs. 15,00,000 from his relative after 3 years. He wants to buy a house for which he wants the money to be paid now. His relative had al