DT Auto Owner Trust

Transcription

1 Presale: DT Auto Owner Trust This presale report is based on information as of Feb. 3, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Preliminary Ratings Class Preliminary rating(i) Type Interest rate Preliminary amount (mil. $)(ii) Expected legal final maturity date A AAA (sf) Senior Fixed June 15, 2020 B AA (sf) Subordinate Fixed Feb. 16, 2021 C A (sf) Subordinate Fixed Nov. 15, 2022 D BBB (sf) Subordinate Fixed Nov. 15, 2022 E BB (sf) Subordinate Fixed Feb. 15, 2024 (i)the rating on each class of securities is preliminary and subject to change at any time. (ii)the actual size of these tranches will be determined on the pricing date. Profile Expected closing date Feb. 16, Collateral Subprime auto loan receivables. Originator DriveTime Car Sales Co. LLC. Transferor Bridgecrest Acceptance Corp. (B/Stable/--)(i). Servicer Bridgecrest Credit Co. LLC(ii). Standby servicer, custodian, and indenture trustee Wells Fargo Bank N.A. (AA-/Negative/A-1+). Owner trustee Wilmington Trust N.A. Lead Underwriter Wells Fargo Securities. (i)formerly known as DT Acceptance Corp. (ii)formerly known as DT Credit Co. LLC. Primary Credit Analyst: Elizabeth T Fitzpatrick, New York (1) ; elizabeth.fitzpatrick@spglobal.com Secondary Contact: Jie Liang, CFA, New York (1) ; jie.liang@spglobal.com See complete contact list on last page(s) FEBRUARY 3,

2 Credit Enhancement Summary Preliminary rating DTAOT DTAOT DTAOT DTAOT (i) Class A AAA (sf) AAA (sf) AAA (sf) AAA (sf) Class B AA (sf) AA (sf) AA (sf) AA (sf) Class C A (sf) A (sf) A (sf) A (sf) Class D BBB (sf) BBB (sf) BBB (sf) BBB (sf) Class E BB (sf) BB (sf) N/A N/A Subordination (% of the initial receivables)(ii) Class A Class B Class C Class D Class E N/A N/A Overcollateralization (% of the initial receivables) Initial Target(iii) Floor Reserve fund (% of the initial receivables) Initial Target Floor Total initial hard credit enhancement (% of the initial receivables) Class A Class B Class C Class D Class E N/A N/A Excess spread per year (%) (estimated)(iv) (i)the credit enhancement for the prior transactions reflects final pricing. (ii)principal will be paid sequentially on the preliminary rated notes. (iii)the overcollateralization target is a percentage of the current receivables balance. (iv)includes servicing and standby servicing fees of approximately 4.05% per year and is presented as a percentage of collateral. The issuer decreased the per-year servicing fee to 3.50% for series ; however, we are maintaining an assumption of 4.05% at this time. DTAOT--DT Auto Owner Trust. N/A--Not applicable. Rationale The preliminary ratings assigned to DT Auto Owner Trust 's (DTAOT 's) $ million asset-backed notes series reflect: The availability of approximately 67.3%, 61.9%, 51.9%, 43.0%, and 38.0% credit support for the class A, B, C, D, and E notes, respectively, based on stressed break-even cash flow scenarios (including excess spread). These credit support levels provide approximately 2.20x, 2.00x, 1.65x, 1.35x, and 1.20x coverage of our expected net loss range of 29.50%-30.50% for the class A, B, C, D, and E notes, respectively (see the Cash Flow Modeling Assumptions And FEBRUARY 3,

3 Results section below for more information). The timely interest and principal payments made by the legal final maturity dates under stressed cash flow modeling scenarios that we deemed appropriate for the assigned preliminary ratings. Our expectation that under a moderate ('BBB') stress scenario, the ratings on the class A, B, and C notes would remain within one rating category of our preliminary 'AAA (sf)', 'AA (sf)', and 'A (sf)' ratings, respectively, and the ratings on the class D and E notes would remain within two rating categories of our preliminary 'BBB (sf)' and 'BB (sf)' ratings, respectively, during the first year, although class E would ultimately default in the moderate ('BBB') stress. These potential rating movements are consistent with our credit stability criteria, which outline the outer bound of credit deterioration equal to a one-category downgrade within the first year for 'AAA' and 'AA' rated securities and a two-category downgrade within the first year for 'A' through 'BB' rated securities under moderate stress conditions (see "Methodology: Credit Stability Criteria," published May 3, 2010). The collateral characteristics of the subprime pool being securitized, including a high percentage (over 85%) of obligors with higher payment frequencies (more than once a month), which we expect will result in a somewhat faster paydown of the pool. The transaction's sequential-pay structure, which builds credit enhancement (on a percentage-of-receivables basis) as the pool amortizes. Key Ratings Considerations We considered the following strengths: The company has more than 23 years of history originating, underwriting, and servicing subprime auto loans, and an over 19-year history of securitizing subprime auto loans. The company successfully weathered the financial crisis, partly because of the majority shareholder providing $135 million in capital (subordinated notes and junior secured notes) and through funding diversification, which included private, unrated securitizations. The company has a strong earnings history and capital position, with approximately $551.7 million in consolidated equity (before adjustments) as of Sept. 30, The company has four separate warehouse facilities with respective termination dates (revolving periods) in April 2018, May 2018, August 2018, and September From , the company successfully changed its operating strategy from a buy-here, pay-here concept to a buy-here, pay-centrally concept. Payments were no longer accepted at the dealerships. We believe that removing collections from the dealerships and centralizing them provides better protection to investors in the event of a servicer transition or the company's bankruptcy. The company is on its eighth-generation credit score card. In our view, continual emphasis on refining its score cards contributed to the lower peak cumulative net losses (CNLs) in the recession (30.9% CNL on DTAOT 2007-A) than those from the 2001 recession (35.1% CNL on DTAOT 2000-C). Wells Fargo Bank N.A. is the standby servicer and the custodian of the contract files. We also considered the following weaknesses and mitigating factors: The company operates in the deep subprime market, lending to consumers with an average FICO score of approximately 541 and approximately 21% with no FICO score. Nonetheless, the company has substantial experience in this market segment, in our view. On Nov. 17, 2014, the Consumer Finance Protection Bureau (CFPB) issued a consent order against the company, in conjunction with a settlement between the company and the CFPB regarding an investigation initiated in April The settlement required the company to pay an $8 million civil cash penalty, refrain from certain allegedly FEBRUARY 3,

4 unfair debt collection practices (such as calling the obligor's workplace or third-party reference after being told not to call), and correct any inaccurate credit reporting information. In addition, the settlement required the company to implement specified changes in servicing practices and to permit the CFPB's oversight to monitor compliance with the consent order for five years. In our opinion, the company has continued to effectively service the loans after the CFPB settlement. There are no performance triggers for these asset-backed securities (ABS) transactions. However, given the high level of credit enhancement, in our scenarios, the collateral can withstand over 95% in cumulative gross losses before the notes with preliminary 'AAA (sf)' ratings incur a loss. Changes From The Series Transaction The structural and credit enhancement changes from the series transaction include. Higher initial overcollateralization of 20.00% and target of 24.25% compared with 19.25% and 23.65%, respectively. Subordination levels of 45.50%, 35.25%, 21.25%, and 8.75% for the class A, B, C and D notes, respectively, up from 45.00%, 33.25%, 19.25%, and 7.00%, respectively. As a result, initial hard credit enhancement increased by 125 basis points (bps), 275 bps, 275 bps, 250 bps, and 75 bps, for the class A, B, C, D, and E notes, respectively. The servicing fee has been decreased to 3.50%. The collateral composition changes from the series include: The percentage of loans in the originator's top three credit grades (A+, A, and B), in aggregate, increased to 67.8% from 66.3%. The weighted average FICO decreased to 541 from 545. The percentage of loans with original terms of months decreased to 34.99% from 36.35%, and those in the 67- to 72-month range increased to 50.32% from 47.88%. The weighted average seasoning decreased to 1.6 months from 2.1 months. The weighted average loan-to-value (LTV) ratio increased slightly to 170.9% from 170.6%. The weighted average LTV ratio, excluding ancillary products, also increased slightly to 131.7% from 131.2%. In our view, the series pool characteristics are similar to the series transaction. Securitization performance has shown some improvement in recent months but, overall, has been relatively stable since 2014 (see chart 2B). Our expected net loss range for the series pool remains the same as the series pool at 29.50%-30.50%. Transaction And Legal Overview DTAOT is DriveTime Car Sales Co. LLC's (DriveTime's) 19th non-bond-insured securitization that S&P Global Ratings will rate since DriveTime also completed a rated stand-alone transaction, series , in December 2009, which we did not rate. At that time, the company still employed a decentralized collection strategy. Before 2008, DriveTime had been a frequent ABS issuer, completing 36 bond-insured securitizations from 1996 through 2007, all rated by S&P Global Ratings. DTAG directly owns DriveTime Sales and Finance Co. LLC (DTSFC), which directly owns DTCS, the originator of the FEBRUARY 3,

5 receivables. This entity sells the vehicles to obligors in the pool, and Bridgecrest Acceptance Corp. (BAC; formerly known as DT Acceptance Corp.), the transferor of the receivables and DTAG's sister company, finances substantially all of the vehicles that the originator sells. BAC purchases the receivables that DTCS originates and is the lien holder for the financed vehicles in the pool. DT Receivables Co LLC, the seller, is a limited-purpose, wholly owned subsidiary of the transferor and organized under Delaware law to acquire the auto loans from the transferor and transfer them to DTAOT , the issuer. Bridgecrest Credit Co. LLC (formerly known as DT Credit Co. LLC), the servicer for this transaction, is a direct wholly owned subsidiary of the transferor (see chart 1). The transaction is structured as a true sale of the receivables from BAC to DT Receivables Co LLC, which will transfer the receivables to the issuer, a newly formed, special-purpose Delaware statutory trust. The issuer will pledge its interest in the receivables and its security interests in the vehicles to the indenture trustee for the noteholders' benefit. In rating this transaction, S&P Global Ratings will review the legal matters that it believes are relevant to its analysis, as FEBRUARY 3,

6 outlined in its criteria. In order to meet credit risk requirements under Regulation RR of the Exchange Act, the transferor, in its capacity as sponsor, intends to, either directly or through its majority-owned affiliates, retain an economic interest in the credit risk of the auto loans of at least 5.0%. This is expected to be achieved through an "eligible horizontal residual interest" under Regulation RR, and by the transferor establishing the reserve account so that it qualifies as an "eligible horizontal cash reserve account" under Regulation RR. Transaction Structure The series transaction will employ a sequential principal payment structure among the preliminary rated class A, B, C, D, and E notes: The class A notes will be paid in full before the class B notes receive principal distributions, then the class B notes will be paid in full before the class C notes receive principal distributions, then the class C notes will be paid in full before the class D notes receive principal distributions, and finally the class D notes will be paid in full before the class E notes receive principal distributions. The sequential-pay mechanism builds credit enhancement, on a percentage basis, for the preliminary rated notes as the pool amortizes. The transaction's structure incorporates a 1.50% nondeclining reserve account and a 20.00% initial overcollateralization amount that will build to a target of 24.25% of the current pool balance before it begins to amortize to its floor of 3.25% of the initial pool balance. We expect the pool to generate approximately 12.78% excess spread per year (using a 4.05% estimate for the per year and standby servicing fees). Payment Structure Payment distributions The class A, B, C, D, and E note issuance amounts will total $ million, and the notes will pay a fixed interest rate. Interest and principal are scheduled to be paid to the preliminary rated notes on the 15th day of each month or the next business day, beginning March 15, On each payment date, before an acceleration of the notes, distributions will be made from available funds according to the payment priority outlined in table 1. In addition, the funds in the reserve account will be available to cover fees, expenses, and interest shortfalls and pay parity principal and principal that are due on the notes' final maturity date. Table 1 Payment Waterfall Priority Payment 1 To the indenture and owner trustees: any accrued and unpaid fees, expenses, and indemnities due to each entity (to the extent the servicer has not previously paid those fees, expenses, and indemnities), provided that those fees and expenses do not exceed $125,000 in aggregate in any calendar year to the indenture trustee and $10,000 in aggregate in any calendar year to the owner trustee. 2 To the standby servicer: the standby servicer fee and any applicable accrued and unpaid fees, expenses, and indemnities due to the standby servicer, provided that the aggregate amount plus any amounts already paid in item 1 shall not exceed $125,000 in aggregate in any calendar year; to the successor servicer: when applicable and to the extent not paid by the predecessor servicer, reasonable transition expenses (up to a $200,000 maximum) incurred by the standby servicer in becoming the successor servicer. FEBRUARY 3,

7 Table 1 Payment Waterfall (cont.) Priority Payment 3 To the servicer: the monthly servicing fee (3.50% per year for series ), any supplemental servicing fees for the related calendar month, and any liquidation reimbursements. 4 To the class A noteholders: the class A note interest distributable amount on the distribution date, together with any class A note interest carryover shortfall on the distribution date. 5 Principal to the extent necessary to reduce the class A note balance to the pool balance. 6 The remaining principal balance of the class A notes on their final scheduled distribution date. 7 To the class B noteholders: an amount equal to the class B note interest distributable amount on the distribution date and the class B note interest carryover shortfall on the distribution date. 8 Principal to the extent necessary, after giving effect to any payments made under items 5 and 6 above, to reduce the combined class A and B note balances to the pool balance. 9 The remaining principal balance of the class B notes on their final scheduled distribution date. 10 To the class C noteholders: an amount equal to the class C note interest distributable amount on the distribution date and the class C note interest carryover shortfall on the distribution date. 11 Principal to the extent necessary, after giving effect to any payments made under items 5, 6, 8, and 9 above, to reduce the combined class A, B, and C note balances to the pool balance. 12 The remaining principal balance of the class C notes on their final scheduled distribution date. 13 To the class D noteholders: an amount equal to the class D note interest distributable amount on the distribution date and the class D note interest carryover shortfall on the distribution date. 14 Principal to the extent necessary, after giving effect to any payments made under items 5, 6, 8, 9, 11, and 12 above, to reduce the combined class A, B, C, and D note balances to the pool balance. 15 The remaining principal balance of the class D notes on their final scheduled distribution date. 16 To the class E noteholders: an amount equal to the class E note interest distributable amount on the distribution date and the class E note interest carryover shortfall on the distribution date. 17 Principal to the extent necessary, after giving effect to any payments made under items 5, 6, 8, 9, 11, 12, 14, and 15 above, to reduce the combined class A, B, C, D, and E note balances to the pool balance. 18 The remaining principal balance of the class E notes on their final scheduled distribution date. 19 The principal distributable amount on the distribution date (to build overcollateralization to its target level). 20 To the reserve account: an amount equal to the excess of the specified reserve account amount over the amount then on deposit in the reserve account. 21 To the indenture and owner trustees and any successor servicer: any fees and expenses and indemnities then due and payable to each party that exceed the cap or annual limitation specified in items 1 or 2 above. 22 All remaining amounts, pro rata, to the RR certificate and the non-rr certificate holders, according to their percentage interest. On each payment date, principal distributions will be made in the following priority: To the class A notes until they are paid in full; then To the class B notes until they are paid in full; then To the class C notes until they are paid in full; then To the class D notes until they are paid in full; and then To the class E notes until they are paid in full. The above payment priorities can change if certain events of default occur and continue, including: A failure to pay interest on the most-senior class; A failure to pay principal at final maturity; The issuer's involuntary and voluntary bankruptcy; and A material breach of a covenant, agreement, representation, or warranty. FEBRUARY 3,

8 If the event of default is related solely to a breach of a covenant, agreement, representation, or warranty, distributions will be made from the available funds according to the priority shown in table 1 except that the principal distributable amount will include all available funds until all the notes are paid in full, and there will be no limitation of fees, expenses, and indemnities in items 1 and 2. For any other events of default, distributions will be made from available funds according to the payment priority outlined in table 2. Table 2 Payment Waterfall Priority Payment 1 To the indenture, the owner trustees, the standby trustee, the servicer, and any successor servicer, any amount due to each entity, without regards to any caps or annual limitations. 2 To the class A noteholders, the class A note interest distributable amount on the distribution date, together with any class A note interest carryover shortfall on the distribution date. 3 Principal to the extent necessary to reduce the class A note balance to zero. 4 To the class B noteholders, an amount equal to the class B note interest distributable amount on the distribution date and the class B note interest carryover shortfall on the distribution date. 5 Principal to the extent necessary to reduce the class B note balance to zero. 6 To the class C noteholders, an amount equal to the class C note interest distributable amount on the distribution date and the class C note interest carryover shortfall on the distribution date. 7 Principal to the extent necessary to reduce the class C note balance to zero. 8 To the class D noteholders, an amount equal to the class D note interest distributable amount on the distribution date and the class D note interest carryover shortfall on the distribution date. 9 Principal to the extent necessary to reduce the class D note balance to zero. 10 To the class E noteholders, an amount equal to the class E note interest distributable amount on the distribution date and the class E note interest carryover shortfall on the distribution date. 11 Principal to the extent necessary to reduce the class E note balance to zero. 12 All remaining amounts to the certificateholders. Securitization Performance CNLs DriveTime's series 2000-A through series transactions have paid off with CNLs ranging between 16.90% (series ) and 35.05% (series 2000-C). Losses were the lowest in the vintages, which incurred 16.90%-23.28% CNLs (see charts 2A and 2B). In our view, these low levels were due to DriveTime having a more creditworthy applicant pool to underwrite because traditional subprime lending was scarce at that time. In addition, we believe that fewer loans in DriveTime's bottom-five credit grades and the company's proprietary credit scoring may have contributed to lower losses. The company implemented its first-generation score card in 2001 and has continually refined it; DriveTime is currently on its eighth generation score card. Losses have risen in DriveTime's outstanding securitizations, which we believe is partly attributable to greater availability of credit in subprime lending, among other factors (see the Managed Portfolio Performance section below). As a result, more consumers with weak credit histories can obtain financing at franchised dealerships and no longer need to seek a vehicle/financing solution from DriveTime or others in the deep subprime arena. We believe the higher FEBRUARY 3,

9 losses likely resulted from the return of DriveTime's traditional customer base, which is more credit-challenged. In our view, the transactions from series onward could lose approximately 26.0%-30.5%, based on the issuer's historical loss curves and our forward-looking projections (see the Surveillance Update section for additional details). Chart 2a Chart 2b Recoveries DriveTime's paid-off securitizations exhibited relatively stable cumulative recovery rates of 25.8%-33.2% (see chart 3). Series and paid off with cumulative recovery rates of 38%-41%, which we believe were somewhat aided by historically high used vehicle prices. The 2012 transactions on average have experienced recoveries of approximately 500 bps lower than the 2011 transactions at a similar point in time. For example, cumulative recovery rates for DTAOT at months 12 and 24 were 25.70% and 29.39%, respectively, compared with 28.93% and 35.85% for DTAOT Beginning with DTAOT , DriveTime pools have included a higher percentage of long-term loans, which could also impair recoveries relative to earlier transactions. We have observed higher recoveries on series onward, which we partially attribute to the refunds from the unused portion of the warranties or other ancillary products with respect to the financed vehicles. DriveTime started to unbundle the ancillary products in fourth-quarter 2013, and any refunds from the warranties and ancillary products are first applied to the principal balance of the auto loans. The vast majority of the series pool has warranties or other ancillary products. FEBRUARY 3,

10 Chart 3 Surveillance Update We currently maintain ratings on 12 outstanding auto loan transactions backed by DriveTime-originated loans issued between 2013 and 2016 (see table 3). We revised our lifetime CNL expectations for series , , , and in January 2016 and maintained our lifetime CNL expectations for series , , , and (see "Nine Ratings Raised, 16 Affirmed On Nine DT Auto Owner Trust Transactions," published Feb. 1, 2016). We will continue to monitor the performance and take rating actions as appropriate. Table 3 Distribution As Of Dec. 31, 2016 Series Month Pool factor (%) Current CNL (%) Current CRR (%) 60-plus-day delinq. (%) Initial lifetime CNL exp. (%) Revised lifetime CNL exp. (%) (i) (i) (i) (i) N/A FEBRUARY 3,

11 Table 3 Distribution As Of Dec. 31, 2016 (cont.) Series Month Pool factor (%) Current CNL (%) Current CRR (%) 60-plus-day delinq. (%) Initial lifetime CNL exp. (%) Revised lifetime CNL exp. (%) N/A N/A N/A N/A N/A N/A N/A (i)revised in January CNL--Cumulative net loss. CRR--Cumulative recovery rate. N/A--Not applicable. Managed Portfolio Performance As of Dec. 31, 2016, DriveTime's serviced portfolio comprised contracts totaling approximately $4.1 billion, a year-over-year increase of approximately 29% (see table 4). Total 31-plus-day delinquencies increased slightly to 17.9% as of Dec. 31, 2016, from 16.5% as of Dec 31, Net charge-offs as a percentage of the average principal increased slightly to 13.5% for the year ended Dec. 31, 2016, from 13.0% for According to management, increased collection staffing and better aligned collector incentives allowed DriveTime to improve the back-end save rates on the delinquent accounts. Delinquencies increased significantly in 2012 from previous years and since then have been over 15% at year end. We partly attribute the increase to DriveTime's change in its charge-off policy in Before December 2011, DriveTime would charge off all auto loans that became 91 days past due at the end of the related month. In December 2011, DriveTime began allowing loans to remain delinquent until 120 days past due before charge-off (which is consistent with many other subprime lenders), as long as the borrower made a qualifying minimum payment within the prior 30 days. In September 2013, it began allowing this qualifying minimum payment to be made within the prior two calendar months. So DriveTime, like many of its peers, is giving its borrowers more time to make payments before repossession, as long as they have shown a willingness and ability to make a recent payment. Therefore, accounts are staying in delinquency status longer than they did in Table 4 Managed Portfolio As of Dec Principal outstanding at end of period (mil. $) 4, , , , , , ,381.1 Average month-end principal amount (mil. $) 3, ,873,3 2, , , , ,378.5 Net charge-offs (mil. $)(i) Net charge-offs as % average month end principal Delinquencies (%) days FEBRUARY 3,

12 Table 4 Managed Portfolio (cont.) As of Dec days plus days Total delinquencies (i)does not include all repossession-related expenses. Pool Analysis As of the Dec. 31, 2016, statistical cut-off date, the series pool comprised approximately $ million in auto loans directly originated by DriveTime in its company-owned dealerships (see table 5). The series pool has similar characteristics to recent securitizations since 2014 in terms of original term, remaining term, and payment frequency. Its credit grade distribution is slightly stronger than the series pool; however, it has marginally more loans with original terms greater than 60 months and the weighted average seasoning is slightly lower. The top state concentrations have been decreasing gradually, given DriveTime's expanding geographical footprint. The percentage of the pool with no FICO score is approximately 21%, which is similar to that of peer issuers' deep subprime securitization pools. DriveTime started to include month loans in 2012, and they represent 50.32% of the series pool. Table 5 DTAOT Collateral Comparison(i) Series Collateral cut-off date Dec. 31, 2016 Sep. 30, 2016 May 31, 2016 March 31, 2016 Dec. 31, 2015 Sept. 30, 2015 May 31, 2015 Jan. 31, 2015 Nov. 30, 2014 Pool size (mil. $) No. of loans 30,728 31,190 33,999 23,803 26,567 30,303 26,370 20,442 23,595 Avg. principal balance ($) Weighted avg. APR (%) Weighted avg. original term (mos.) Weighted avg. remaining term (mos.) 17,717 17,426 17,349 17,089 17,353 17,095 17,065 17,122 16, Seasoning (mos.) Total % with original terms of months % with original terms of months FEBRUARY 3,

13 Table 5 DTAOT Collateral Comparison(i) (cont.) Series % with original terms of months Weighted avg. original FICO score % below or equal to 550 FICO (excluding the no FICO component) % with no FICO % of pool that pay biweekly or semimonthly Top five state concentrations (%) Originator's credit grades Top three grades (%)(ii) Bottom five grades (%)(iii) S&P Global Ratings' expected CNL (%) TX=15.71 TX=15.41 TX=14.73 TX=15.21 TX=17.51 TX=17.56 TX=18.8% TX=18.51 TX=21.89 FL=14.79 FL=14.24 FL=13.96 FL=14.77 FL=13.78 FL=13.99 FL=14.3% FL=12.95 FL=17.72 GA=9.38 GA=8.84 GA=7.09 GA=8.20 GA=8.46 GA=9.00 GA=9.0% NC=7.50 GA=13.55 NC=6.68 NC=5.93 NC=6.42 OH=5.88 OH=5.90 NC=5.95 NC=6.5% OH=6.82 AZ=8.40 CA=5.22 OH=5.32 OH=6.37 NC=5.82 NC=5.81 OH=5.64 OH=5.8% GA=6.46 NC= (i)all percentages are of the initial gross receivables balance. (ii)includes credit grades A+, A, and B. (iii)includes credit grades C, C-, D+, D and D-. DTAOT--DT Auto Owner Trust. APR--Annual percentage rate. CNL--Cumulative net loss. S&P Global Ratings' Expected Loss: 29.50%-30.50% To derive the expected losses for the series pool, we considered the securitization data from the 38 transactions we have rated since 2000, with greater emphasis on recent transactions, as well as origination static pool data that DriveTime provided. In addition, we compared the series pool's characteristics with those of previous pools to determine its relative strengths and weaknesses. We also considered that used vehicle values and recovery rates will likely decline in the near term. We analyzed origination static pool data broken out by credit grade and original term (less than or equal to 60 months, months, and months) to factor in the impact of long-term contracts. We based our net loss proxies primarily on the 2011 through second-quarter 2015 vintages' loss performance, as well as observed trends in some more recent vintages. FEBRUARY 3,

14 Though we observed some improvement in recent performance and in credit grade mix, this was offset by adjustments to repossession expenses that were not already included as a component of the net charge off. Based on our analysis of the securitization performance, static pool data, and collateral comparisons, we expect DTAOT to experience CNLs of 29.50%-30.50%. Cash Flow Modeling Assumptions And Results We modeled the series transaction to simulate stress scenarios that we believe are appropriate for the assigned preliminary ratings (see table 6). The break-even results show that each class is enhanced to the degree necessary to withstand a stressed net loss level that is consistent with our assigned preliminary ratings. Table 6 Cash Flow Assumptions/Results Class A B C D E Preliminary rating AAA (sf) AA (sf) A (sf) BBB (sf) BB (sf) ABS voluntary prepayments (%) Recoveries (%) Recovery lag (mos.) Servicing fee (%)(i) CNL timing (mos.) 12/24/36/48 12/24/36/48 12/24/36/48 12/24/36/48 12/24/36/48 Front-loaded loss curve CNL timing input (%) 50/90/100 50/90/100 50/90/100 50/90/100 50/90/100 CNL timing actual (%) 100/0 66/100 50/90/100 50/90/100 50/90/100 % of collateral defaulted Approximate CNL break-even level (%)(ii) Back-loaded loss curve CNL timing input (%) 40/70/90/100 40/70/90/100 40/70/90/100 40/70/90/100 40/70/90/100 CNL timing actual (%) 100/0/0/0 66/100/0/0 44/77/98/100 40/70/90/100 40/70/90/100 % of collateral defaulted Approximate CNL break-even level (%)(ii) (i)assumes a 4.0% base servicing fee plus the backup servicing fee. The transaction documentss provide for a 3.50% servicing fee. (ii)the maximum CNLs on the pool that the transaction can withstand without a payment default on the relevant classes of notes. ABS--Absolute prepayment speed. CNL--Cumulative net loss. Because recent pools have contained a significant concentration of longer-term contracts and have relatively little seasoning, we placed greater emphasis on the stressed cash flows with the back-loaded loss curve to stress the later stages of the transaction. Results for both loss curve scenarios exceeded the coverage level required to support the preliminary ratings assigned. For the series , the servicing fee has been reduced to 3.50% per year in the transaction documents from 4.00% FEBRUARY 3,

15 where it has been historically. While the servicer has provided data that indicate that its cost to service is less than 4.00% per year, we are currently maintaining our assumption of a 4.00% base servicing fee to be consistent with others in its peer group. Scenario Analysis In addition to running break-even cash flows, we conducted a sensitivity analysis to see what its impact on our ratings would be under a moderate ('BBB') stress scenario, all else being equal (see table 7). Table 7 Scenario Analysis Summary--Moderate Loss Scenario Loss level (multiple) 1.35x base case CNL (%) CNL timing (12/24/36/48) (%) 45/75/95/100 ABS voluntary prepayments (%) 0.60 Recoveries (%) 30 Recovery lag (mos.) 3 Servicing and other fees (%) 4.05 assumed Coverage multiple Class A Initially 2.01x and reaches 2.88x by month 12. Class B Initially 1.76x and reaches 2.42x by month 12. Class C Initially 1.41x and reaches 1.79x by month 12. Class D Initially 1.10x and reaches 1.23x by month 12. Class E Initially 0.89x and decreases to 0.83x by month 12. Ultimately defaults. ABS--Absolute prepayment speed. Moderate loss scenario: 40.50% (1.35x CNL results) Under the 40.50% moderate stress net loss scenario (approximately 1.35x our expected CNL level), the multiple coverage levels reflect the transaction's hard credit support in the form of subordination and the sequential-pay structure, whereby subordination will grow as a percentage of the declining pool balance (see chart 4). In this moderate ('BBB') stress net loss scenario, the class A, B, C, and D notes are paid in full by months 14, 19, 30, and 50, respectively. The preliminary 'BB (sf)' rated class E notes do not get paid off; rather, only 64.92% of the initial class E note principal balance is repaid by the time the pool amortizes to zero in month FEBRUARY 3,

16 Chart 4 Under this moderate stress scenario, all else being equal, we believe the ratings on the class A, B, and C notes would likely remain within one category of our preliminary 'AAA (sf)', 'AA (sf)', and 'A (sf)' ratings, respectively, during the first year. Ratings on the class D and E notes would likely remain with two categories of our preliminary 'BBB (sf)' and 'BB (sf)' ratings, respectively, during the first year. These potential rating movements are consistent with our credit stability criteria, which outline the outer bound of credit deterioration equal to a one-category downgrade within the first year for 'AAA' and 'AA' rated securities and a two-category downgrade within the first year for 'A' through 'BB' rated securities under moderate stress conditions (see "Methodology: Credit Stability Criteria," published May 3, 2010). Legal Final Maturities To test the legal final maturity dates, we determined the date when the respective notes would be fully amortized in a zero-loss, zero-prepayment scenario, added three months to the result, and then verified that the proposed legal final maturity dates were longer than that. To accommodate for extensions on the receivables, we verified that the legal final maturity date of the longest-dated security (class E) was set equal to, minimum, the tenor of the longest receivable in the pool plus eight months. Furthermore, in the break-even scenario for each respective rating level, we confirmed that there was sufficient credit enhancement to both cover losses and repay the related notes in full by the FEBRUARY 3,

17 respective legal final maturity date. DTAG DTAG, formerly known as Ugly Duckling Corp., was incorporated by Ernest C. Garcia II in Phoenix in DTAG, through DTSFC, its integrated used car sales and finance company, operates one of the largest chains of used car dealerships in the U.S., with a primary focus on the sale and lease of used vehicles and related products to the subprime market. As of Dec. 31, 2016, DTAG operated 143 branded dealerships and 27 reconditioning facilities in 64 geographical areas across 26 states, and it has two major collection centers (Dallas and Mesa, Ariz.). Until the end of 2009, the dealerships functioned as traditional buy here, pay here stores, where subprime borrowers bought their vehicles and made loan payments in the same location. DTAG has not received any in-store payments since Sept. 1, DTAG has a centralized collection operation, and customers can submit payments by mail, phone, and online and at multiple locations, such as Walmart or Western Union, which facilitate cash and electronic debit payments. In addition, customers may set up one-time and recurring automated clearing house payments. On the retail side, DriveTime sources its inventory by buying used vehicles, primarily at auctions, that it believes are affordable and reliable transportation for its clientele. The vehicles are typically six years old with approximately 80,000-85,000 miles. DriveTime then sends these vehicles to one of the reconditioning centers, where they undergo a safety and mechanical inspection and are reconditioned for subsequent sale. The reconditioning often includes new belts, tires, spark plugs, vacuuming, and general cleaning. DriveTime spends approximately $1,200 to recondition each vehicle. Once DriveTime reconditions the vehicles and they pass a final quality control check, DriveTime distributes them to its retail stores. DriveTime's retail strategy relies heavily on its targeted TV, radio, and online advertising to promote its brand. Through advertising, potential customers are directed to the company's website to complete a loan application before visiting one of its dealerships. Besides providing vehicles and financing for those vehicles, DriveTime offers a 36-month/36,000-mile or a five-year/50,000-mile warranty for its vehicles for major repairs, which, as of October 2013, has been sold separately from the vehicle. On the finance side of its business, DriveTime uses a centralized proprietary credit scoring model to make automated credit decisions. Once a consumer's loan application is put into the system, in-store or online, the system scores the applicant based on traditional credit bureau data and alternate data sources, such as checking and debit account history. The overall score, together with down payments and the vehicle, determine the loan's interest rate and term. Per DriveTime's management, store personnel must verify the information on the application before approving the loan, including proof of insurance, identity, and--for customers with lower credit scores--employment and residence. DriveTime employs behavioral scoring models to rank the risk of its delinquent accounts and to establish daily call queues based on these scores. Accounts in early delinquencies are managed primarily through an automated dialer and messaging system out of the Dallas or Mesa collection facilities. Mid-stage delinquencies are handled manually out of the Dallas collection facility. All late-stage collection, repossessions, and recoveries are handled in Mesa, where the FEBRUARY 3,

18 collectors work the accounts from the time they receive them until resolution. Repossessions generally commence after 91 days of delinquency at the end of the month, and accounts are charged-off at 91-days delinquent unless an obligor has made a qualifying cash payment in the 60 days preceding month-end; in that case, these accounts may be 120 days or more past due at the end of a month. As a result, many charge-offs are full-balance charge-offs, with the recovery proceeds following one or two months later. Since January 2012, vehicles have been equipped with anti-theft/gps devices, which have aided in the repossession process in addition to locating a stolen vehicle. Management has stated that these devices do not include the starter-interrupt functionality. DriveTime uses extensions as a loss-mitigation tool. According to the transaction documents, DriveTime currently limits extensions to 5.50% per month on a rolling 12-month basis. The company's extension policy follows: Extensions may not be granted for more than four months within any consecutive 12 months or may not extend any receivable's final payment date more than eight months beyond the original final payment date. The extension brings the loan current. Proof of income is required in most cases. S&P Global Ratings revised its outlook on DTAG to stable from negative and affirmed its 'B' long-term issuer credit rating on the company. The revised outlook reflects our belief that rapid growth in leverage has receded and that the company has made continuous improvements in liquidity management ( see "DriveTime Automotive Group Inc. Outlook Revised To Stable From Negative On Receding Leverage; 'B' Ratings Affirmed," published May 10, 2016). Related Criteria And Research Related Criteria Criteria - Structured Finance - General: Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 8, 2016 Criteria - Structured Finance - General: Methodology: Criteria For Global Structured Finance Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A Nonmonetary EOD, March 2, 2015 Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, And Indemnifications, July 12, 2012 General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Criteria - Structured Finance - ABS: General Methodology And Assumptions For Rating U.S. Auto Loan Securitizations, Jan. 11, 2011 Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology For Servicer Risk Assessment, May 28, 2009 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Appendix III: Revised UCC Article 9 Criteria, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Criteria Related To Asset-Backed Securities, Oct. 1, 2006 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Securitizations By Code Transferors, Oct. 1, FEBRUARY 3,

19 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Select Issues Criteria, Oct. 1, 2006 Related Research Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016 DriveTime Automotive Group Inc. Outlook Revised To Stable From Negative On Receding Leverage; 'B' Ratings Affirmed, May 10, 2016 Nine Ratings Raised, 16 Affirmed On Nine DT Auto Owner Trust Transactions, Feb. 1, 2016 In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, The analysts would like to thank Linda Yeh and Adrian Castro for their analytical contributions to this presale report. Analytical Team Primary Credit Analyst: Elizabeth T Fitzpatrick, New York (1) ; elizabeth.fitzpatrick@spglobal.com Secondary Contact: Jie Liang, CFA, New York (1) ; jie.liang@spglobal.com FEBRUARY 3,

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