Presale │ October 14, 2021 fitchratings.com 1 Structured Finance Auto Loan ABS U.S.A. Capital One Prime Auto Receivables Trust 2021-1 Capital Structure Class Expected Ratings Expected Rating Outlooks Amount ($ Mil.) CE (%) b Interest Rate (%) Final Maturity A-1 F1+sf N.A. 278.000 3.25 TBD 11/15/2022 A-2 AAAsf Stable 466.200 a 3.25 TBD 2/18/2025 A-3 AAAsf Stable 466.200 a 3.25 TBD 9/15/2026 A-4 AAAsf Stable 105.390 3.25 TBD 4/15/2027 B AAsf Stable 13.565 2.25 TBD 4/15/2027 C Asf Stable 13.564 1.25 TBD 5/17/2027 D BBBsf Stable 13.564 0.25 TBD 3/15/2028 Total 1,356.483 a The class A-2 and A-3 note balances are subject to change and will be determined on or prior to the pricing date. Each of the class A-2 and A-3 note balances are expected to be within a range of $396.3 million to $536.1 million. b Credit enhancement (CE) does not include credit to excess spread. N.A. – Not applicable. TBD – To be determined. Fitch Ratings expects to rate the auto loan ABS issued by Capital One Prime Auto Receivables Trust 2021-1 (COPAR 2021-1), as listed above. The notes will be backed by new and used automobile and light truck loans originated and acquired by Capital One, National Association (CONA), the sponsor, originator and administrator of the receivables. The transaction will be serviced by CONA, operating through its Capital One Auto Finance (COAF) division, a wholly owned, indirect subsidiary of Capital One Financial Corporation (COFC), a bank holding company. Key Rating Drivers Collateral — Very Strong Prime Credit Quality: The 2021-1 pool has a weighted average (WA) FICO score of 774, with FICO scores above 750 totaling 67.4%, which is consistent with recent transactions. No obligor has a FICO below 700. Original loan terms greater than 60 months increased to 73.7%, compared to a 64% average of prior transactions, but the pool has strong vehicle brand, model and geographic diversification. Used vehicles increased to 67.0%, compared to a 57% average for prior transactions, due to demand dynamics. Forward-Looking Approach to Derive Base Case Loss Proxy: CONA’s managed portfolio performance since 2012 has been strong with low losses and delinquencies. Weakening trends have been observed in the recent 2016–2017 vintages, including slowly rising losses; however, this is consistent with the broader market, and absolute loss levels remain well below 0.50%. CONA’s pre-recession (2003–2007) COPAR securitizations’ ratings performance was within Fitch’s expectations. Fitch considered economic conditions and future expectations by assessing key macroeconomic and wholesale market conditions when deriving the series loss proxy. Fitch’s loss proxy for 2021-1 is 1.00%, consistent with transactions dating back to 2019-1. Payment Structure — Sufficient Credit Enhancement: Initial hard credit enhancement (CE) for the notes comprises junior note subordination, overcollateralization (OC) and a nondeclining 0.25% reserve account. The initial hard CE is consistent with prior transactions. The structure is sufficiently enhanced to cover losses in excess of the expected rating multiples over Fitch’s 1.00% base case net loss proxy. Inside This Report Page Key Rating Drivers 1 Highlights 2 Key Transaction Parties 2 Transaction Comparison 2 Sector Risks: Additional Perspective 3 Asset Analysis 3 Cash Flow Analysis 11 Expected Rating Sensitivity 12 Transaction Structure 15 Counterparty Risk 18 Criteria Application, Model and Data Adequacy 18 Surveillance 19 Appendix 1: Origination and Servicing 20 Appendix 2: ESG Relevance Score 22 This presale report reflects information in Fitch Ratings’ possession at the time that Fitch’s expected ratings are issued. The transaction has yet to be finalized and changes could occur. As a result, the expected ratings disclosed in this report do not reflect final ratings but are solely based on information provided by the issuer as of Oct. 14, 2021. These expected ratings are contingent on final documents conforming to information already received. Ratings are not a recommendation to buy, sell or hold any security. The prospectus and other material should be reviewed prior to any purchase. Fitch’s related Rating Action Commentary issued at transaction closing will include final ratings, which will include an assessment of any material information that may have changed subsequent to the publication of the presale. Analysts John Um, CFA +1 212 908-0287 [email protected]Andrew Peller +1 212 908-0220 [email protected]
Transcript
Presale │ October 14, 2021 fitchratings.com 1
Structured Finance
Auto Loan ABS U.S.A.
Capital One Prime Auto Receivables Trust 2021-1
Capital Structure
Class Expected Ratings
Expected Rating Outlooks
Amount
($ Mil.) CE (%)b
Interest
Rate (%) Final Maturity
A-1 F1+sf N.A. 278.000 3.25 TBD 11/15/2022
A-2 AAAsf Stable 466.200a 3.25 TBD 2/18/2025
A-3 AAAsf Stable 466.200a 3.25 TBD 9/15/2026
A-4 AAAsf Stable 105.390 3.25 TBD 4/15/2027
B AAsf Stable 13.565 2.25 TBD 4/15/2027
C Asf Stable 13.564 1.25 TBD 5/17/2027
D BBBsf Stable 13.564 0.25 TBD 3/15/2028
Total 1,356.483
aThe class A-2 and A-3 note balances are subject to change and will be determined on or prior to the pricing date. Each of the class A-2 and A-3 note balances are expected to be within a range of $396.3 million to $536.1 million. bCredit enhancement (CE) does not include credit to excess spread. N.A. – Not applicable. TBD – To be determined.
Fitch Ratings expects to rate the auto loan ABS issued by Capital One Prime Auto Receivables Trust 2021-1 (COPAR 2021-1), as listed above. The notes will be backed by new and used automobile and light truck loans originated and acquired by Capital One, National Association (CONA), the sponsor, originator and administrator of the receivables. The transaction will be serviced by CONA, operating through its Capital One Auto Finance (COAF) division, a wholly owned, indirect subsidiary of Capital One Financial Corporation (COFC), a bank holding company.
Key Rating Drivers Collateral — Very Strong Prime Credit Quality: The 2021-1 pool has a weighted average (WA) FICO score of 774, with FICO scores above 750 totaling 67.4%, which is consistent with recent transactions. No obligor has a FICO below 700. Original loan terms greater than 60 months increased to 73.7%, compared to a 64% average of prior transactions, but the pool has strong vehicle brand, model and geographic diversification. Used vehicles increased to 67.0%, compared to a 57% average for prior transactions, due to demand dynamics.
Forward-Looking Approach to Derive Base Case Loss Proxy: CONA’s managed portfolio performance since 2012 has been strong with low losses and delinquencies. Weakening trends have been observed in the recent 2016–2017 vintages, including slowly rising losses; however, this is consistent with the broader market, and absolute loss levels remain well below 0.50%. CONA’s pre-recession (2003–2007) COPAR securitizations’ ratings performance was within Fitch’s expectations. Fitch considered economic conditions and future expectations by assessing key macroeconomic and wholesale market conditions when deriving the series loss proxy. Fitch’s loss proxy for 2021-1 is 1.00%, consistent with transactions dating back to 2019-1.
Payment Structure — Sufficient Credit Enhancement: Initial hard credit enhancement (CE) for the notes comprises junior note subordination, overcollateralization (OC) and a nondeclining 0.25% reserve account. The initial hard CE is consistent with prior transactions. The structure is sufficiently enhanced to cover losses in excess of the expected rating multiples over Fitch’s 1.00% base case net loss proxy.
Inside This Report Page Key Rating Drivers 1 Highlights 2 Key Transaction Parties 2 Transaction Comparison 2 Sector Risks: Additional Perspective 3 Asset Analysis 3 Cash Flow Analysis 11 Expected Rating Sensitivity 12 Transaction Structure 15 Counterparty Risk 18 Criteria Application, Model and Data Adequacy 18 Surveillance 19 Appendix 1: Origination and Servicing 20 Appendix 2: ESG Relevance Score 22 This presale report reflects information in Fitch Ratings’ possession at the time that Fitch’s expected ratings are issued. The transaction has yet to be finalized and changes could occur. As a result, the expected ratings disclosed in this report do not reflect final ratings but are solely based on information provided by the issuer as of Oct. 14, 2021. These expected ratings are contingent on final documents conforming to information already received. Ratings are not a recommendation to buy, sell or hold any security. The prospectus and other material should be reviewed prior to any purchase. Fitch’s related Rating Action Commentary issued at transaction closing will include final ratings, which will include an assessment of any material information that may have changed subsequent to the publication of the presale.
Capital One Prime Auto Receivables Trust 2021-1 Presale │ October 14, 2021 fitchratings.com 2
Structured Finance
Auto Loan ABS U.S.A.
Seller/Servicer Operational Review — Consistent Origination/Underwriting/Servicing: Fitch currently rates CONA ‘A’/‘F1’ and its parent, COFC, ‘A–’/‘F1’, and both long-term ratings have Stable Rating Outlooks. CONA demonstrates solid capabilities as an originator, underwriter and servicer, as evidenced by its historical portfolio and prime securitization performance. Fitch deems the company to be capable of servicing this series.
Highlights
Effect Highlight
+ Strong Prime Platform: CONA has a strong prime portfolio as reflected in its securitized pools. Additionally, cumulative net losses (CNLs) on CONA’s managed portfolio are among the lowest of prime issuers rated by Fitch.
+
Strong Performance; Change in Base Case Proxy Derivation: CONA’s managed portfolio and COPAR transactions continue to demonstrate consistently strong performance relative to peers. Fitch incorporated a through-the-cycle approach and included the prior recessionary period as part of its base case proxy derivation for this transaction. The 2006–2009 vintage CNL performance was utilized from other peer prime issuers. Prior transactions’ proxy derivation considered a narrower range of peak recessionary vintages (2006–2008) given the lack of performance history.
-
Increased Used Vehicles and Longer Term Loans: Compared to prior transactions, the 2021-1 pool consists of a higher concentration of used vehicles (67.0%) and extended-term (61+ months) loans (73.8%). The former is attributed to the lack of new vehicle supply, while the latter trend is consistent with market trends. The extended-term loans are offered to borrowers with relatively high FICOs, averaged at 772.
Neutral Consistent Hard CE: Initial hard CE for all classes of notes is in line with prior transactions since 2019-2, and the notes have sufficient loss coverage at their respective rating stresses.
Neutral No LIBOR Exposure: The transaction does not have any asset, liability or hedge exposure to LIBOR.
Neutral
Minimal Credit Impact from ESG: The highest level of ESG credit relevance is a score of ‘3’. This means ESG issues are credit-neutral or have only a minimal credit impact on the transaction, due to either their nature or the way in which they are being managed. See the ESG Navigator in Appendix 2 for details.
The concentration of electric and hybrid vehicles, comprising approximately 1% of the pool, did not impact Fitch’s rating analysis or conclusions for this transaction; as such, it does not impact Fitch’s ESG Relevance Score for the transaction.
Source: Fitch Ratings.
Key Transaction Parties Role Name Fitch Rating
Issuer Capital One Prime Auto Receivables Trust 2021-1
NR
Depositor Capital One Auto Receivables, LLC NR
Sponsor/Seller/ Administrator/Servicer
Capital One, National Association A/F1; Rating Outlook Stable
Ultimate Parent Capital One Financial Corporation A–/F1; Rating Outlook Stable
Indenture Trustee Wilmington Trust, National Association
A/F1; Rating Outlook Negative
Owner Trustee BNY Mellon Trust of Delaware AA/F1+; Rating Outlook Stable
Asset Representations Reviewer Clayton Fixed Income Services LLC NR
Lead Arranger J.P. Morgan Securities LLC AA/F1+; Rating Outlook Stable
NR – Not rated. Source: Fitch Ratings, COPAR 2021-1.
Capital One Prime Auto Receivables Trust 2021-1 Presale │ October 14, 2021 fitchratings.com 3
Structured Finance
Auto Loan ABS U.S.A.
Sector Risks: Additional Perspective
Key Sector Risks
Sector or Asset Outlook Fitch’s 2021 asset and ratings outlooks for prime auto loan ABS are both ‘stable’.
Macro or Sector Risks Auto loan ABS performance has been more resilient than initially expected through the coronavirus pandemic and subsequent economic crisis, as delinquencies and default levels since the onset of the pandemic have been stable to improving compared with pre-pandemic levels. However, Fitch acknowledges that some uncertainty remains related to the still slightly elevated unemployment levels in the absence of payment relief and further government assistance measures.
Relevant Research See Fitch’s press release, entitled “Soaring Vehicle Values Support Record Auto ABS Performance,” published July 14, 2021 at www.fitchratings.com.
Source: Fitch Ratings.
Asset Analysis
Base Case Loss Determination
CONA provided Fitch with eight years of static net loss data for its retail portfolio. Fitch analyzed the quarterly static pool data to determine the base case loss estimate for the pool. Static pool data received were stratified into subsegments based on the following collateral characteristics:
• FICO scores in bands of 700–724, 725–749, 750–774, 775–799 and 800+.
• Original terms of 36 or fewer payments, 37–48 payments, 49–60 payments, 61–72 payments, 73–75 payments and greater than 75 payments.
• LTVs of less than 80%, between 80% and 100% and greater than 100%.
WA APR (%) 3.89 2.43 3.05
WA LTV (%) 95.89 N.P. N.P.
WA FICO Score 774 771 767
WA Original Term (Months) 68.3 61.7 65.4
WA Remaining Term (Months) 60.3 49.4 53.5
Seasoning (Months) 8.0 12.3 11.9
Loans > 60 Months Original Term (%) 73.68 29.52 47.27
Loans ≤ 60 Months Original Term (%) 26.32 70.48 52.73
New Vehicles (%) 33.0 90.9 73.7
Used Vehicles (%) 67.0 9.1 26.3
Geographic Distribution (%)
State 1 13.38 (TX) 17.31 (CA) 26.41 (CA)
State 2 12.88 (CA) 9.26 (TX) 12.71 (TX)
State 3 9.13 (FL) 5.88 (FL) 4.32 (PA)
State 4 4.36 (GA) 5.45 (IL) 4.24 (IL)
State 5 4.17 (LA) 5.12 (OH) 3.72 (NJ)
CE (%)b
Class A 3.25 2.75 2.75
Class B 2.25 N.A. 0.25
Class C 1.25 N.A. N.A.
Class D 0.25 N.A. N.A.
Fitch Ratingsc
Class A F1+sf/AAAsf F1+sf/AAAsf NR
Class B AAsf N.A. NR
Class C Asf N.A. N.A.
Class D BBBsf N.A. N.A.
Fitch Base Case Loss Proxy (%) 1.00 0.90 N.A.
aPool as of the cutoff date. bInitial hard CE. cFor COPAR 2021-1, the ratings are expected. FICO – Fair Isaac Corp. HAROT – Honda Auto Receivables Owner Trust. LTV – Loan to value ratio. N.A. – Not applicable. N.P. – Not provided. NR – Not rated. TAOT – Toyota Auto Receivables Owner Trust. Source: Fitch Ratings, COPAR, HAROT, TAOT.
Capital One Prime Auto Receivables Trust 2021-1 Presale │ October 14, 2021 fitchratings.com 4
Structured Finance
Auto Loan ABS U.S.A.
• New/used vehicles.
To derive a base case loss estimate, Fitch analyzed the static pool data provided by CONA and incorporated prime peer portfolio and securitization performance to arrive at a base case CNL proxy of 1.00% for the pool, consistent with prior transactions.
Historical loss timing curves and recent performance for each of the static pool vintages were used to extrapolate CNL expectations for each of the components of the pool listed above. These expectations varied for certain characteristics of the pool. Expected losses were weighted according to the composition of the pool to yield a CNL expectation for the transaction.
Since CONA only provided historical static pool CNL performance data from 2012–2Q21, prime peer CNL data were incorporated into the analysis as a proxy to determine the 2021-1 loss proxy. Fitch utilized the CNL performance of CONA’s static portfolio from 2015–2017 and other prime peer issuers’ recessionary 2006–2009 CNL performance to derive the loss proxy. In a change from prior transactions, Fitch included the 2009 vintage from other prime peer issuers to incorporate a through-the-cycle recessionary period, as CONA’s managed portfolio and COPAR transactions continue to demonstrate consistently strong performance relative to its peers. The managed portfolio vintage range utilized gives credit to CONA’s strong performance since 2012 while also utilizing prior recessionary loss level data from prime peers, including during the stressed 2008–2009 economic downturn.
CNL performance for the paid-in-full COPAR 2003–2007 securitizations was also reviewed when determining the 2021-1 loss proxy but not utilized, as the current 2021-1 pool and CONA retail loan platform have much stronger credit quality. Recoveries were estimated using CONA recovery data, as well as current and future expectations of used vehicle values.
The CONA managed portfolio annual vintages from 2012–2020 are currently performing well below those of recessionary transactions; however, the more recent of these vintages are showing slightly higher losses versus earlier vintages. Assuming similar macroeconomic and industry conditions over the life of the transaction, pool factor extrapolations of recent managed pool vintages suggest CNLs could be approximately 0.13% to 0.37%.
Collateral Analysis
The securities in this series are backed by a pool of strong prime automobile loans secured by new and used vehicles originated utilizing CONA’s origination platform. The property of the trust includes: the receivables and collections thereon; security interest in the vehicles; rights to proceeds from claims on physical damage, credit life and disability insurance policies covering the financed vehicles/obligors; rights in the collection, principal distribution and reserve accounts and permitted investments thereon; rights under the repurchase documents for the repurchase of ineligible receivables; and other related items.
Historically, prior to its merger with CONA, COAF had issued transactions from the COPAR platform, prior to the 2008–2009 recession. COPAR 2019-1 was the first transaction COPAR had issued since 2007-2, which closed in October 2007. Compared to 2007 COPAR pools securitized, 2019-1, 2019-2 and 2020-1 exhibit several notable positive shifts in collateral and credit composition toward higher credit quality obligors with a more diversified pool. This reflects CONA’s tighter underwriting guidelines and the quality of its originations starting from 2012 through 2Q21.
The COPAR 2021-1 pool is comparable to COPAR 2020-1 from an obligor credit quality perspective and is notably stronger versus the pre-recession 2003–2007 prime pools securitized by COAF (now a part of CONA, as mentioned previously). COPAR 2021-1 is broadly comparable to recent transactions from other prime auto loan ABS pools issued in 2018–2021.
COPAR 2021-1’s statistical pool is one of the strongest issued by prime auto loan ABS issuers. The pool’s attributes show similarities to peer prime issuer pools securitized, including American Honda Finance Corporation’s HAROT 2021-3 and Toyota Auto Receivables’ 2021-B Owner Trust, all issued in 2021 and rated by Fitch.
One item of note is that COPAR 2021-1 includes a higher concentration of used vehicles compared to the above-mentioned platforms. However, compared to other platforms, the historical performance of CONA’s used vehicle loans is generally much closer in loss levels versus new vehicle performance.
COPAR 2021-1
Net Loss Proxy (%) 1.00%
U.S. Prime Auto Loan ABS Sector Outlooks
Asset Performance Stable
Ratings Performance Stable
Source: COPAR 2021-1.
Capital One Prime Auto Receivables Trust 2021-1 Presale │ October 14, 2021 fitchratings.com 5
Structured Finance
Auto Loan ABS U.S.A.
Borrower Attributes
Obligor Credit Quality — Stable
The WA FICO score for 2021-1 is 774, consistent with but down from prior transactions that ranged from 777 to 779, exhibiting a pool comprising strong, prime quality borrowers. All obligors in the pool have a minimum FICO score of 700. This compares favorably to both other bank portfolios and captive auto issuers in the prime auto loan space. About one third of the pool falls into each of the 701–750, 751–800 and 801 and higher FICO buckets, with 31.5% in the 801+ bucket.
N.A. – Not applicable. NP – Not provided. Source: COPAR 2021-1.
Capital One Prime Auto Receivables Trust 2021-1 Presale │ October 14, 2021 fitchratings.com 6
Structured Finance
Auto Loan ABS U.S.A.
Collateral Attributes
New/Used Concentrations — Shifting
New vehicles represent 33.0% of the pool, a decrease from 41.1% in the 2020-1 transaction. The remaining 67.0% comprises used vehicles, a notable increase from prior transactions that is largely attributable to increased vehicle demand with limited supply.
Generally, a high concentration of used vehicles is viewed negatively, as used vehicles are more subject to market fluctuations and are generally indicative of weaker obligor credit profiles. However, as discussed further in the performance section, Fitch examined the CONA static pool data and determined that the performance of used vehicles did not show the material difference compared to new vehicles that is generally observed in other prime auto loan pools, which is viewed as a positive. Fitch forecasts out new and used vehicle static loss data when deriving the loss proxy for this pool and, therefore, it captures future performance by this variant.
Segment Concentrations — Stable
SUVs/crossover utility vehicles (CUVs) make up the highest concentration of the pool, totaling 49.8% of the pool, in line with 49.5% in 2020-1. Cars total 24.2% of the pool, down slightly from 26.6% in 2020-1. The remainder of the pool consists of light trucks and vans.
Due to the high volume of originations at CONA, the vehicle segment breakout is diverse, largely comparable to current market trends and relatively comparable to pools securitized by noncaptive bank ABS issuer platforms.
Brand/Model Diversification — Stable
Consistent with prior transactions, the vehicles in the 2021-1 pool are well diversified from a manufacturer, brand and model standpoint, which is typical of noncaptive bank securitized pools. In terms of manufacturers, the highest concentrations are Toyota (14.5%), Chevrolet (12.9%), Ford (12.1%), Honda (8.7%) and Nissan (7.2%). No other manufacturer constitutes more than 7.2% of the pool.
33.0 41.1 44.1 47.7
67.0 58.9 56.0 52.4
0
20
40
60
80
100
2021-1 2020-1 2019-2 2019-1
(%)
COPAR — Vehicle Condition
New Used
Source: Fitch Ratings, COPAR 2021-1.
24.2 26.6 25.9 26.8
49.8 49.5 51.9 51.6
23.1 20.2 19.2 18.0
2.9 3.6 3.0 3.6
0102030405060708090
100
2021-1 2020-1 2019-2 2019-1
(%)
COPAR — Vehicle Segment
Car SUV/CUV Truck Other
Source: Fitch Ratings, COPAR 2021-1.
Capital One Prime Auto Receivables Trust 2021-1 Presale │ October 14, 2021 fitchratings.com 7
Structured Finance
Auto Loan ABS U.S.A.
In terms of vehicle models, the top three concentrations are the Ford F-150, totaling 4.2% of the pool, the Chevrolet Silverado 1500 (2.9%) and the Jeep Wrangler (2.8%). No other model exceeds 2.8% of the pool, consistent with the 2020-1 transaction. This diversification of both brand and model, which is generally at the high end of issuers, is viewed positively due to the increased protection from shifts in brand demand, product recalls and otherwise negative market movements.
Loan Attributes
Original Loan Term — Increasing
The WA original term (WAOT) for 2021-1 is 68.3 months; this is up from prior transactions but generally in line with other peer prime auto loan ABS pools securitized in recent years. The concentration of loans with original terms over 60 months is 73.7% of the pool, consistent relative to prime pools securitized in recent years. The extended term concentration is higher than in prior deals and represents a shift from earlier COPAR transactions.
Longer term loans can enable consumers to afford more expensive vehicles, including to higher quality borrowers. Longer loan terms are offered to borrowers to lower their monthly payments or for the purchase of higher-priced vehicles. Shorter term loans tend to perform better and expose
Toyota Toyota Toyota Toyota
Chevrolet ChevroletHonda Honda
Ford Ford Ford Chevrolet
Honda Honda Chevrolet FordNissan Jeep Jeep Jeep
0
10
20
30
40
50
60
70
2021-1 2020-1 2019-2 2019-1
(%)
COPAR — Top Five Vehicle Brands
Brand 1 Brand 2 Brand 3 Brand 4 Brand 5
Source: Fitch Ratings, COPAR 2021-1.
F-150 Wrangler CR-V CR-V
Silverado 15 F-150 RAV4Wrangler
Wrangler Accord F-150Highlander
RAV4 CR-V CamryRAV4
1500Highlander Wrangler
F-150
02468
1012141618
2021-1 2020-1 2019-2 2019-1
(%)Model 1 Model 2 Model 3 Model 4 Model 5
Source: Fitch Ratings, COPAR 2021-1.
COPAR — Top Five Vehicle Models
73.7 64.6 62.0 61.5
68.3
66.5 66.1 66.0
60
62
64
66
68
70
72
0
20
40
60
80
100
2021-1 2020-1 2019-2 2019-1
(%)
COPAR — Original Terms > 60 Months
>60 Months (LHS) WAOT (Months) (RHS)
Source: Fitch Ratings, COPAR 2021-1.
Capital One Prime Auto Receivables Trust 2021-1 Presale │ October 14, 2021 fitchratings.com 8
Structured Finance
Auto Loan ABS U.S.A.
the transaction to lower loss severity because amortization does not trail depreciation as much as in longer term loans if a loan defaults and the vehicle is repossessed and disposed of at auction.
Seasoning — Stable
Seasoning for the pool is at 8.0 months, in line with the six-month–nine-month range for the platform and overall in line with peer transactions. Higher seasoning of loans is viewed as a credit positive, as more seasoned loans have usually experienced a higher percentage of their eventual lifetime losses in the first year. This is further supported by the overall low losses seen thus far in CONA’s managed portfolio and very strong credit quality of the pool.
Loan-to-Value Ratio — Increasing
The WA LTV in 2021-1 is 95.9%, higher than previous pools but still among the lowest observed in prime pools securitized in recent years and consistent with the previous transaction. This is viewed positively, as lower LTVs, particularly those below 100% (54.7%), indicate lending to higher quality borrowers with a higher ability to pay and result in much lower loss severity and, ultimately, losses in the event of defaults and repossessions.
Annual Percentage Rate — Stable
The unadjusted WA APR in 2021-1 is 3.89%, with the majority of APRs (56.6%) between 2.0% and 4.0%. APRs are generally below those of comparable prime auto ABS issuers and are largely driven by the high credit quality of the borrowers in the portfolio, who receive lower coupon rates overall. The 2021-1 WA APR is lower than in 2020-1 (4.58%) and 2019-2 (4.67%), driven by lower overall interest rates.
Geographic Concentration — Increasing
Given CONA’s nationwide platform footprint, the geographic diversity of the pool is high and on par with those of other top prime auto loan issuers. The top three largest state concentrations in 2021-1 are in Texas (13.4%), California (12.9%) and Florida (9.1%). The top three state concentrations for the platform have consistently been represented by these regions.
0
2
4
6
8
10
2021-1 2020-1 2019-2 2019-1
(%)
COPAR — WA Seasoning
Seasoning (Months)
Source: Fitch Ratings, COPAR 2021-1.
96.093.7 93.4 92.2
707580859095100105110
0
20
40
60
80
100
2021-1 2020-1 2019-2 2019-1
COPAR — LTV Distribution
<80 80–100 >100 WA LTV (RHS)
Source: Fitch Ratings, COPAR 2021-1.
(%) (%)
Capital One Prime Auto Receivables Trust 2021-1 Presale │ October 14, 2021 fitchratings.com 9
Structured Finance
Auto Loan ABS U.S.A.
The concentration in the top five states is 43.9%; this is higher than the 39% average for prior transactions but in line with recent peer prime auto loan transactions. Geographic diversity is important to shield the pool from rolling recessions and regional economic downturns.
Portfolio and ABS Performance
Managed Portfolio
CONA’s U.S. auto loan portfolio performance remained within a narrow range of 26 basis points (bps)–44 bps through 2Q21. Total 30+ day delinquencies as of June 2021 were 20 bps, marginally lower than 27 bps a year prior. These levels were down from historical highs reached at YE19 (44 bps) but remain relatively consistent yoy and are low relative to peer bank issuers and captive finance companies.
U.S. Managed Portfolio Delinquencies and Net Losses on CONA Retail Loans (New and Used Car and Light Truck Contracts — Total Retail Contracts Outstanding at Period End, Excluding Bankruptcies)
60 Days–89 Days DQ (%) f 0.04 0.06 0.07 0.10 0.10 0.09 0.07 0.06 0.05
90+ Days DQ (%) f 0.01 0.02 0.02 0.03 0.03 0.03 0.02 0.02 0.02
Total 30+ Days DQ (%) f 0.20 0.27 0.31 0.44 0.42 0.40 0.33 0.31 0.26
Total 60+ Days DQ (%) f 0.05 0.08 0.09 0.13 0.13 0.11 0.09 0.08 0.07
aNumber of receivables outstanding and average principal balance outstanding include receivables that have been sold and remain serviced by the originator and its affiliates. bAverages are calculated based on beginning and end of period balances. cNet dollar loss is equal to serviced losses excluding accounting accruals. dPercentages for the six months ended June, 30, 2020 and 2021 are not annualized. eAs a percentage of average principal amount outstanding. fAs a percentage of principal outstanding at period end. DQ – Delinquent. O/S – Outstanding. Source: Fitch Ratings, COPAR 2021-1.
Historically, net losses on the portfolio from 2012 through 2020 remained very low, ranging between 3 bps and 18 bps, and represent the lowest of most prime issuers rated by Fitch. The peak net loss in 2017 was largely driven by a conscious decision to expand originations, which was reversed in 2018 and 2019, and underwriting standards were tightened. Recent YTD net losses were at relative extremes in 2Q21 with no losses realized, compared to 37 bps in 2Q20, immediately after the height of the pandemic.
TX TX TX TX
CACA CA CA
FLFL FL FL
GA
PA OH OH
LAOH LA LA
43.938.7 39.8 37.5
05
101520253035404550
2021-1 2020-1 2019-2 2019-1
(%)
COPAR — Top Five State Concentration
State 1 State 2 State 3 State 4 State 5
Source: Fitch Ratings, COPAR 2021-1.
Capital One Prime Auto Receivables Trust 2021-1 Presale │ October 14, 2021 fitchratings.com 10
Structured Finance
Auto Loan ABS U.S.A.
CNL performance of CONA static pools since 2012 is notably low compared to those of peer prime auto loan originators, reaching a peak of no more than 30 bps for any vintage. CONA’s managed portfolio CNL levels are consistent with peer prime lenders’ securitization performance, which provides a reference to CONA’s strong performance. In general, securitization performance is typically much stronger than managed pool performance due to initial seasoning prior to being sold into each trust, minimum FICO requirements and other eligibility criteria.
Of the static pools since 2012, the 2016–2017 annual vintages are showing higher losses versus prior years, while performance has shown some improvement for subsequent vintages. Regardless, CNLs for all vintages remain very low overall.
Securitization History
Starting in 2003 and through 2007, COAF (prior to the creation of CONA and COAF’s merger with CONA) regularly accessed the ABS market for funding through the COPAR platform. COAF also previously issued subprime auto loan ABS through its Capital One Auto Finance Trust (COAFT), which were rated by Fitch (over 15 transactions were issued). COAF recently re-entered the market and issued COPAR 2019-1, COPAR 2019-2 and COPAR 2020-1.
The CNL performance of the prime 2003–2007 transactions ranged from 0.29% to 3.07%. The 2007 COPAR pools exhibited the worst performance versus prior transactions, with CNL performance ranging from 2.94% to 3.07%. These loss levels exceeded Fitch’s initial loss forecasts of 2.10% and 2.25%, driven by the recession and severely depressed wholesale vehicle market (WVM). Despite this weaker than expected performance, the higher loss levels recorded in these transactions were offset by structural features increasing CE, and the transactions paid in full with no negative rating actions taken by Fitch.
Importantly, Fitch expects 2019-1, 2019-2 and 2020-1 to perform notably better, as they have much stronger credit quality and positive pool composition, and expects CNL to be below 1.0%.
0.0
0.1
0.2
0.3
0.4
0 6 12 18 24 30 36 42 48 54 60 66 72
(%)
CONA Managed Pool vs. COPAR ABS CNL Performance2012 2013 2014 20152016 2017 2018 20192020 COPAR 2019-1 COPAR 2019-2 COPAR 2020-1
Source: Fitch Ratings, CONA.
0.00.51.01.52.02.53.03.5
0 6 12 18 24 30 36 42
(%)
COPAR ABS CNL Performance
2003-1 2003-2 2004-1 2004-2 2004-3 2005-1 2006-1
2006-2 2007-1 2007-2 2019-1 2019-2 2020-1
Source: Fitch Ratings, CONA.
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Structured Finance
Auto Loan ABS U.S.A.
Cash Flow Analysis Fitch used its proprietary cash flow model (the Fitch Auto Timeshare Model) in its analytical process to simulate stresses to the transaction and determine the sufficiency of available enhancement for each class. Fitch utilized its cash flow model to replicate the flow of funds outlined in the transaction documents. Fitch’s model incorporated six representative lines of collateral segmented by the original amount financed for each capital structure.
Modeling Assumptions
Fitch analyzed cash flows reflecting stressed loss rates, recovery rates and recovery timing lags under several loss timing scenarios, as well as delinquent interest stresses to account for uncollected collateral interest arising from delinquencies, under its derived loss estimate of 1.00%.
Modeling assumptions include the following:
• Front-loaded (50%/40%/10%; primary scenario), mid-loaded (35%/45%/15%/5%) and back-loaded (15%/25%/30%/30%) loss timing scenarios.
• A recovery rate of 50%.
• A recovery and chargeoff lag of three months.
• An ABS prepayment speed of 1.30%.
• A 0.25% delinquent interest rate stress.
• A 0% reinvestment rate.
• A 1.00% servicing fee.
Recovery and chargeoff lags of three months were included to address timing between repossession, liquidation and receipt of sale proceeds. Gross and net losses were distributed over the life of the collateral pool, in accordance with Fitch’s assessment of the historical loss speeds based on analysis of the data for CONA’s portfolio segments and comparable securitizations. Loss curves under front-loaded (primary scenario), mid-loaded and back-loaded scenarios were run to evaluate the impact of different timing scenarios. The mid-loaded and back-loaded curves were considered primarily as sensitivity scenarios.
Stress Scenario Results
Under Fitch’s primary loss timing scenario in the stressed case break-even analysis, the class A, B, C and D notes could withstand approximately 6.0%, 5.1%, 4.1% and 3.2%, respectively, before incurring losses on principal or interest. The front-loaded loss timing curve is the primary scenario, which was derived utilizing paid-in-full, peer prime issuer securitization net loss (timing) proxy data. The break-even losses sustained by the structure under Fitch’s expected loss rate were stressed by a multiple consistent with the expected ratings. Under Fitch’s stress scenario, class A, B, C and D notes are able to withstand over 5.0x, 4.0x, 3.0x and 2.0x the base case CNL estimate, respectively.
The multiple levels for each class of notes meet the required levels for the ratings recommended by Fitch. While Fitch does not expect loss timing in the transaction to be consistent with the mid-loaded and back-loaded scenarios, the structure was able to support coverage for ‘AAAsf’, ‘AAsf’, ‘Asf’ and ‘BBBsf’ ratings under both scenarios. Fitch reviewed all cash flow runs to verify that each rated class of notes would be paid in full by the respective final maturity dates.
COPAR Historical CNL Performance
Transaction Paid-in-Full CNL (%)
COPAR 2003-1 0.38
COPAR 2003-2 0.33
COPAR 2004-1 0.29
COPAR 2004-2 0.45
COPAR 2004-3 0.72
COPAR 2005-1 1.13
COPAR 2006-1 1.49
COPAR 2006-2 2.28
COPAR 2007-1 2.94
COPAR 2007-2 3.07
Source: Fitch Ratings, COPAR 2021-1.
Sample Stress Scenario
Front (Primary Scenario) Mid Back
Assets (%)
CNL Proxy (%) 1.00 1.00 1.00
Prepayments 1.30 1.30 1.30
Year 1 50 35 15
Year 2 40 45 25
Year 3 10 15 30
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Structured Finance
Auto Loan ABS U.S.A.
Expected Rating Sensitivity
Rating Sensitivity to CNL and Recovery Rate Stresses
Class A Class B Class C Class D
Original Rating AAAsf AAsf Asf BBBsf
1.5x CNL Stress AAsf Asf BBBsf BBBsf
2.0x CNL Stress Asf BBBsf BBBsf BBsf
50% Recovery Rate Haircut AAsf Asf BBBsf BBBsf
0.8x CNL Stress AAAsf AAAsf AAAsf AAsf
Source: Fitch Ratings.
Down Sensitivity
Unanticipated increases in the frequency of defaults could produce CNL levels that are higher than the base case and would likely result in declines of CE and remaining net loss coverage levels available to the notes. Additionally, unanticipated declines in recoveries could result in lower net loss coverage, which may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.
Therefore, Fitch conducts sensitivity analyses by stressing both a transaction’s initial base case CNL and recovery rate assumptions and examining the rating implications on all classes of issued notes. The CNL sensitivity stresses the CNL proxy to the level necessary to reduce each rating by one full category, to non-investment grade (BBsf) and to ‘CCCsf’ based on the break-even loss coverage provided by the CE structure.
Additionally, Fitch conducts a 1.5x and 2.0x increase to the CNL proxy, representing both moderate and severe stresses. Fitch also evaluates the impact of stressed recovery rates on an auto loan ABS structure and the rating impact with a 50% haircut. These analyses are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust’s performance.
Cumulative Net Loss Rating Sensitivity
The greatest risk of defaults to an auto loan ABS transaction is early in the transaction’s life, prior to benefiting from de-levering. Therefore, Fitch stressed each class of notes prior to any amortization to its first dollar of default to examine the structure’s ability to withstand the aforementioned stressed CNL scenarios.
Defined Rating Categories
The first sensitivity analysis consists of utilizing the break-even CNL coverage available to the notes and assessing the level of CNL it would take to reduce each rating by one full category, to non-
Year 4 0 5 30
Recovery Rate (%) 50.00 50.00 50.00
Recovery Lag (Months) 3 3 3
Chargeoff Lag (Months) 3 3 3
Liabilities (%)
Annual Servicing 1.00 1.00 1.00
Delinquency Stress 0.25 0.25 0.25
Bond Coupon (Initial) 0.86 0.86 0.86
Break-Even Results Class A Class B Class C Class D Class A Class B Class C Class D Class A Class B Class C Class D
The Rating Sensitivity section provides insight into the model-implied sensitivities the transaction faces when one assumption is stressed while holding others equal. The modeling process uses the estimation and stress of these variables to reflect asset performance in a stressed environment. The results to the left should only be considered as one potential outcome, as the transaction is exposed to multiple dynamic risk factors. They should not be used as indicators of possible future performance.
No change or positive change
Negative change within same category
– 1 category change
– 2 category change
– 3 or larger category change
See report for further details.
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Structured Finance
Auto Loan ABS U.S.A.
investment grade and to ‘CCCsf’. The implied CNL proxy necessary to reduce the ratings as stated above will vary by class based on the break-even loss coverage provided by the CE structure.
Under this analysis, all analytical assumptions are unchanged, with total loss coverage available to class A notes at 6.03%. Therefore, as shown in the table above, the implied CNL proxy would have to increase to 1.51% for class A notes to be downgraded by one rating category, or a 4.0x multiple (6.03%/4.00 = 1.51%). Applying the same approach but increasing net losses to levels commensurate with rating downgrades to ‘BBsf’ and ‘CCCsf’ suggests net losses would have to increase to 4.02% and 10.05% for rating multiples to decline to 1.5x and 0.6x, respectively.
1.5x and 2.0x Base Case Proxy
The second sensitivity also focuses on stressing the impact of CNLs outside of base case expectations by 1.5x and 2.0x multiples relative to available loss coverage. This analysis provides a good indication of the rating sensitivity of notes to unexpected deterioration of a trust’s performance. In this example, under the 1.5x scenario, the base case proxy increases to 1.50% and an implied loss multiple of 4.02x, which would suggest a downgrade to the ‘AAsf’ category. Under the more severe 2.0x stress, the base case proxy increases to 2.00%, which results in an implied multiple of 3.02x or a downgrade to ‘Asf’.
CNL Rating Sensitivity (1.5x and 2.0x Base Case Proxy)
Base Case (%) Multiple (x) Expected Rating
Class A Loss Coverage 6.03 — —
Base Case Proxy 1.00 6.03 AAAsf
1.5x Base Case 1.50 4.02 AAsf
2.0x Base Case 2.00 3.02 Asf
Class B Loss Coverage 5.07 — —
Base Case Proxy 1.00 5.07 AAAsf
1.5x Base Case 1.50 3.38 Asf
2.0x Base Case 2.00 2.54 BBBsf
Class C Loss Coverage 4.11 — —
Base Case Proxy 1.00 4.11 AAsf
1.5x Base Case 1.50 2.74 BBBsf
2.0x Base Case 2.00 2.06 BBBsf
Class D Loss Coverage 3.15 — —
Base Case Proxy 1.00 3.15 Asf
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Structured Finance
Auto Loan ABS U.S.A.
CNL Rating Sensitivity (1.5x and 2.0x Base Case Proxy)
Base Case (%) Multiple (x) Expected Rating
1.5x Base Case 1.50 2.10 BBBsf
2.0x Base Case 2.00 1.58 BBsf
Source: Fitch Ratings.
Due to de-levering and structural features, a typical auto loan ABS transaction tends to build CE and loss coverage levels over time, absent any increase to projected defaults/losses beyond expectations. The greatest risk of losses to an auto loan ABS transaction is over the first one to two years of the transaction, when the benefit of de-levering may be muted. The analysis shown above is conservative, as it does not give explicit credit to the de-levering and building CE afforded in auto loan ABS transactions.
Recovery Rate Sensitivity
Recoveries can have a material impact on auto ABS transaction performance, particularly in stressed economic environments where default frequency is higher. This sensitivity analysis evaluates the impact of stressed recovery rates on an auto ABS structure and rating impact.
Historically, recovery rates on auto loan collateral have ranged from 40% to 70%. Utilizing the base case of 1.00% detailed in the CNL sensitivities above, the recovery rate credit under Fitch’s primary scenario is 50%, resulting in a cumulative gross default (CGD) base case proxy of 2.00%. Applying a 50% haircut to the 50% recovery rate results in a stressed recovery rate of 25% and a base case CNL proxy of 1.50% (2.00% x 75% = 1.50%). Under this stressed scenario, the implied multiple declines to 4.02x (6.03%/1.50% = 4.02), resulting in an implied rating of ‘AAsf’.
Recovery Rate Sensitivity
(%)
Class Class A Class B Class C Class D
Current Rating AAAsf AAsf Asf BBBsf
Break-Even Loss Coverage 6.03 5.07 4.11 3.15
CNL Proxy 2.00 2.00 2.00 2.00
50% Recovery Rate Haircut 1.50 1.50 1.50 1.50
Expected Multiple (x) 5.00 4.00 3.00 2.00
Implied Multiple (x) 4.02 3.38 2.74 2.10
Implied Rating AAsf Asf BBBsf BBBsf
Source: Fitch Ratings.
Up Sensitivity
Conversely, stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE levels and consideration for potential upgrades. If CNL is 20% less than the projected proxy, the expected ratings for the subordinate notes could be upgraded by up to one to two rating categories.
Up Sensitivity
(%)
Class Class A Class B Class C Class D
Current Rating AAAsf AAsf Asf BBBsf
Break-Even Loss Coverage 6.03 5.07 4.11 3.15
CNL Proxy (20% Down) 0.80 0.80 0.80 0.80
Expected Multiple (x) 5.00 4.00 3.00 2.00
Multiple (x) 7.54 6.34 5.14 3.94
Implied Rating AAAsf AAAsf AAAsf AAsf
Source: Fitch Ratings.
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Structured Finance
Auto Loan ABS U.S.A.
Transaction Structure
Credit Enhancement
Initial hard CE of 3.25% for the class A notes comprises subordination (3.00%), a reserve account (0.25%) and initial OC (>0.00%), all as a percentage of the initial net principal balance (INPB). The target OC is 0.25% of the INPB. The initial CE levels for class B, C and D notes are 2.25%, 1.25% and 0.25%, respectively. CE for 2021-1 is in line with prior transactions.
Credit Enhancement Comparison: COPAR
(%) 2021-1 2020-1 2019-2 2019-1 2007-2 2007-1
Class Size
Class A 97.00 97.00 97.00 96.50 95.00 95.75
Class B 1.00 1.00 1.00 1.50 5.00 4.25
Class C 1.00 1.00 1.00 1.00 N.A. N.A.
Class D 1.00 1.00 1.00 1.00 N.A. N.A.
Overcollateralization (OC)
Initiala 0.00 0.00 0.00 0.00 4.50 3.25
Targeta 0.25 0.25 0.25 0.25 4.50 3.25
Reserve Account
Initiala 0.25 0.25 0.25 0.25 1.00 1.00
Targeta 0.25 0.25 0.25 0.25 2.00 2.00
Total Initial Hard CE
Class A 3.25 3.25 3.25 3.75 10.50 8.50
Class B 2.25 2.25 2.25 2.25 5.50 4.25
Class C 1.25 1.25 1.25 1.25 N.A. N.A.
Class D 0.25 0.25 0.25 0.25 N.A. N.A.
Excess Spread
Initial (p.a.) 2.03 1.48 1.67 1.74 1.54 1.48
aPercentage of initial receivables. N.A. – Not applicable. p.a. – Per annum. Source: COPAR 2021-1.
Reserve Account
The nondeclining reserve account is 0.25% of the INPB, in line with prior transactions since 2019-1 and consistent with other prime auto loan issuers.
Overcollateralization
OC is initially 0.00 bps of the INPB, growing to a target OC of 0.25%, in line with prior transactions since 2019-1 but generally lower than that of other prime auto loan issuers.
Subordination
Class B, C and D notes will provide 3.00% subordination to class A notes at closing, while class B and C notes have 2.00% and 1.00% subordination, respectively, which will increase over time as the transaction amortizes and senior notes pay down. This amount of subordination is in line with the prior two transactions and is relatively within range of and consistent with comparative prime transactions issued in 2018–2021.
Excess Spread
Initial excess spread is expected to be around 2.03% per annum, above transactions since 2019-1 but in line with that of recent peer prime auto loan ABS transactions in the market. The increase in excess spread is mainly driven by a larger reduction in the WA note coupon compared to the decrease in WA APR.
Interest Allocation
Monthly interest is allocated among the class A notes on a pro rata basis. Interest on class A-1 notes is calculated based on the actual number of days in the interest period and a 360-day year.
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Structured Finance
Auto Loan ABS U.S.A.
Interest on class A-2 through D notes is paid sequentially and calculated based on a 360-day year consisting of 12 30-day months. The certificates are noninterest-bearing and subordinated in priority to the notes’ interest distributions.
Principal Allocation
Principal payments will be made sequentially to each class in order of seniority, starting with class A-1 notes. The trust will not make principal payments on any class of notes until the principal amounts for all of the more senior classes are paid in full. The principal amount of each class of notes is expected to be repaid by that class’s final scheduled payment date. If the principal amount of any class of notes is not repaid in full by its final scheduled payment date, an event of default will occur and the principal amount of all classes of notes may be declared immediately due and payable.
Simplified Priority of Payments
1 Servicing fees.
2 Class A interest, pro rata.
3 Principal payment sequentially by class, in an amount equal to the first allocation principal amount (excess of class A note balance over the net pool balance).
4 Class B interest.
5 Principal payment sequentially by class, in an amount equal to the second allocation principal amount (excess of the sum of the class A and B note balances over the net pool balance).
6 Class C interest.
7 Principal payment sequentially by class, in an amount equal to the third allocation principal amount (excess of the sum of the class A, B and C note balances over the net pool balance).
8 Class D interest.
9 Principal payment sequentially by class, in an amount equal to the fourth allocation principal amount (excess of the sum of the class A, B, C and D note balances over the net pool balance).
10 Replenish the reserve account to its required amount.
11 Principal payment sequentially by class, in an amount equal to the regular principal distribution amount (excess of the sum of all note balances over the net pool balance minus target OC).
12 Unpaid amounts owed to the trustees, administrator and asset representations reviewer, pro rata.
13 Any remaining funds to the certificateholders.
Source: Fitch Ratings, COPAR 2021-1.
Events of Default
To protect noteholders from issuer insolvency or deterioration in receivables quality, the trust includes several events of default. Fitch believes the occurrence of these events is unlikely. Events of default, which include missed payments, breach of representations and warranties and bankruptcy and insolvency events, are as follows:
• A default of five business days or more in the payment of interest on the notes.
• A default in the payment of the outstanding principal balance on any note by the note’s final scheduled payment date.
• A default in observation or performance of any of the indenture covenants or agreements.
• A breach of the representations and warranties.
• Insolvency or bankruptcy of the issuing entity.
Upon the acceleration of the notes following an event of default, principal payments will be made first to class A-1 notes until they are paid in full. After class A-1 notes are paid in full, principal payments will be made to class A-2, A-3 and A-4 notes on a pro rata basis based on the outstanding principal balance of those classes of notes until they are paid in full. After class A notes are paid in full, principal payments will be made sequentially to class B, C and D notes. After all classes of notes are paid in full, principal payments will be made on the certificates until they are paid in full.
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Structured Finance
Auto Loan ABS U.S.A.
Money Market Tranche Sizing
Fitch assumed 0% defaults and a 0% ABS prepayment speed in assessing the size of class A-1 notes. Under this scenario, class A-1 notes are paid in full upon the 13th month following closing and, therefore, are eligible for money market registration.
Determination of Legal Maturity
Fitch expects the legal maturity date for class A-2, A-3, A-4, B and C notes to be at least the date on which the classes will be paid in full when amortizing the pool with 0% defaults and a 0% ABS prepayment speed and then adding another three months to the result. Class A-2, A-3, A-4, B and C notes conform to this criterion.
For class D notes, Fitch expects the legal maturity date to be at least six months after the longest contract maturity date to account for extensions and recoveries. These notes conform to this criterion.
Legal Structure
Fitch believes the legal structure of the transaction provides that a bankruptcy of CONA would not impair the timeliness of payments on the securities. Fitch expects to receive and review legal opinions to the effect that the transfer of receivables to the trust constitutes a true sale and not a secured financing, and that the assets of the trust would not be consolidated with those of CONA in the event of bankruptcy. Furthermore, Fitch expects to receive an opinion of counsel that the trustee would have a first-perfected security interest in the assets transferred to the trust.
Rating Confirmations
Multiple instances in the transaction documents reference potential changes that are subject to a Fitch rating confirmation. Fitch is not a transaction party and has no obligation to provide rating confirmations. Fitch will continue to exercise its discretion in choosing to issue a rating confirmation or otherwise. Where relevant to Fitch’s ratings, the agency prefers to issue public commentary on the rating impact of the change. Fitch’s approach to and concerns regarding rating confirmations are highlighted in “Rating Confirmations in Structured Finance and Covered Bonds,” available at www.fitchratings.com.
aNeither the certificates, which represent an equity interest in the issuing entity, nor the class B, C and D notes are not being offered hereby. bNot less than 5% of each class of notes will be retained by CONA (which, for EU risk-retention purposes, will be a wholly owned special purpose subsidiary of CONA) or one or more majority-owned affiliates for CONA to satisfy the credit-risk retention obligations of CONA, as described under the credit-risk retention and securitization regulations sections of the prospectus.Source: COPAR 2021-1.
Structural Diagram
Capital One, National Association(Sponsor, Originator and Servicer)
Capital One Auto Receivables, LLC(Depositor)
Capital One Prime Auto Receivables Trust 2021-1
(Issuing Entity)
Underwriters
Investors
BNY Mellon Trust of Delaware
(Owner Trustee)
Wilmington Trust National Association(Indenture Trustee)
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Structured Finance
Auto Loan ABS U.S.A.
Disclaimer
Fitch relies in its credit analysis on legal and/or tax opinions provided by transaction counsel for the avoidance of doubt. Fitch has always made clear that it does not provide legal and/or tax advice or confirm that the legal and/or tax opinions, or any other transaction documents, or any transaction structures, are sufficient for any purpose. The disclaimer at the foot of this report makes it clear that this report does not constitute legal, tax and/or structuring advice from Fitch and should not be used or interpreted as legal, tax and/or structuring advice from Fitch. Should readers of this report need legal, tax and/or structuring advice, they are urged to contact relevant advisers in the relevant jurisdictions.
Counterparty Risk Fitch assesses the counterparty risk under its “Structured Finance and Covered Bonds Counterparty Rating Criteria” to be in line with the ratings assigned based on the documentation provisions and analytical adjustments described in the following table.
Criteria Application, Model and Data Adequacy
Criteria Application
See page 2 for the list of Applicable Criteria.
Fitch applies its “U.S. Auto Loan ABS Rating Criteria” as its sector-specific criteria under the overarching framework provided by the “Global Structured Finance Rating Criteria,” which is the master criteria for the sector. The remaining criteria listed under Applicable Criteria are cross-sector criteria that outline Fitch’s approaches to counterparty risk and interest rate change vulnerability that are relevant for the ratings.
Models
The models referenced below were used in the analysis. Click on each link for the model (if published) or for the relevant criteria for a description of the model:
• Auto Timeshare Model
• ABS Loss Forecaster Model
Counterparty Risk Exposures
Counterparty Type
Counterparty Name
Minimum Ratings Under Criteria
Minimum Ratings and Remedial Actions Under Documents Analytical Adjustments
Issuer Account Bank Risk
Wilmington Trust, National Association
LT IDR: ‘A’ or ST IDR: ‘F1’
Minimum IDR of ‘A’ or ‘F1’; replacement within 10 business days of downgrade below the minimum ratings.
N.A.; Minimum ratings and remedial actions are expected to be in line with criteria for eligible accounts.
Servicer/ Commingling Risk
Capital One, National Association
N.A. There is no minimum rating requirement for the servicer.
N.A.; Commingling risk is considered immaterial since funds must be remitted to the issuer’s collection account within two business days of receipt.
Servicer/Payment Interruption Risk
Capital One, National Association
N.A. There is no minimum rating requirement for the servicer.
N.A.; Payment interruption risk is immaterial given the minimum impact of a servicer insolvency on collections and the forwarding of payments to the issuer accounts.
Servicing Continuity Risk
Capital One, National Association
N.A. There is no minimum rating requirement for the servicer. The indenture trustee, at the direction of a supermajoritya of the controlling class, must find a new servicer or petition the court to appoint a new servicer.
N.A.; Servicer continuity risk has been assessed to be mitigated in accordance with Fitch’s counterparty criteria because of the depth of the servicing market and sufficient economic incentives to attract a high quality replacement servicer.
aA supermajority comprises at least 66.67% of the outstanding note balance. IDR – Issuer default rating. LT – Long-term. N.A. – Not applicable. ST – Short-term. Source: Fitch Ratings, COPAR 2021-1.
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Structured Finance
Auto Loan ABS U.S.A.
Data Adequacy
Substantially Material Sources
In its analysis, Fitch utilized vintage static pool net loss data stratified by several characteristics, including FICO, new/used, LTV and original term. The data were provided by CONA and were not, to Fitch’s knowledge, audited by any third parties. However, Fitch compared the unaudited vintage net loss data with the vintage (securitization/managed portfolio) net loss data in the series prospectus, which were audited by an internationally recognized accounting firm. Fitch considers the CNL expectation derived utilizing the unaudited net loss data to be reasonable compared with the audited data provided in the prospectus. Therefore, no adjustments were made to Fitch's analysis.
Additionally, Fitch relied on detailed stratifications of the collateral pool to ascertain the characteristics of the pool that could affect transaction performance. The data were provided by the originator and transaction sponsor and were not, to Fitch’s knowledge, audited by any third parties. Fitch compared the unaudited stratifications with those in the series prospectus, which were audited by an internationally recognized accounting firm. The audited stratifications provided in the series prospectus were substantively the same as those provided to Fitch. Therefore, no adjustments were made to Fitch's analysis.
Use of Third-Party Due Diligence Pursuant to SEC Rule 17g-10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by Ernst & Young LLP. The third-party due diligence described in Form 15E focused on comparing or recomputing certain information with respect to 125 loan contracts from the collateral pool of assets for the transaction. Fitch considered this information in its analysis, and the findings did not have an impact on the agency’s analysis/conclusions. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained at the bottom of the related rating action commentary.
Surveillance Fitch receives servicer reports on a monthly basis that detail the note paydown, as well as asset and overall transaction performance and characteristics. If a transaction is identified as performing outside of expectations, a full review will be conducted, and any recommendations will be presented to a rating committee. If performance remains within expectations, the transaction will receive an in-depth review on an annual basis. Fitch keeps investors informed about reviews and rating actions through its website. More information on Fitch’s surveillance products is available on Fitch’s website at www.fitchratings.com.
Fitch will regularly monitor the transaction. Details of the transaction’s performance are available to subscribers at https://app.fitchconnect.com/home.
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Structured Finance
Auto Loan ABS U.S.A.
Appendix 1: Origination and Servicing
Parent Company — Capital One Financial Corporation
Fitch affirmed COFC's Long-Term Issuer Default Rating (IDR), Short-Term IDR and Viability Rating at 'A–', ‘F1’ and 'a–', respectively, in May 2021. The Rating Outlook was revised to Stable from Negative. COFC’s bank subsidiary, CONA, was upgraded to ‘A’ from ‘A–’ in September 2021.
Sponsor and Servicer
CONA will be the sponsor, originator, administrator and servicer of this series. CONA is a national banking association and a wholly owned, indirect subsidiary of COFC (incorporated in Delaware in 1994). CONA is a commercial bank offering a wide range of banking services to its customers.
The company has previously issued multiple securitizations backed by prime and subprime auto loans, the last occurring in 2007 through COAF, which was previously a wholly owned subsidiary of CONA. On March 3, 2011, COAF merged with CONA, with CONA being the surviving entity. Operations at COAF continue as they did prior to the merger, yet COAF is now a division of CONA.
Originations and Underwriting
CONA provides vehicle financing to consumers indirectly through automotive dealerships. Motor vehicle retail installment sale contracts for new and used vehicles are purchased and originated through motor vehicle dealers (dealers), with dealerships in 48 states. Each dealer is required to meet certain minimum standards and is subject to periodic review and evaluation in connection with CONA’s dealer management policies. All participating dealers must execute a dealer agreement with CONA that, among other considerations, sets out the guidelines and procedures of the purchasing and origination process.
Each contract application is forwarded by the dealer to CONA and underwritten under CONA’s guidelines. Underwriting decisions are made primarily on a quantitative analysis of the applicant’s credit history and monthly income, the principal amount and term of the receivable and the age, type and market value of the related financed vehicle. Credit approval guidelines comprise numerous evaluation criteria, including credit history, employment stability, credit score, collateral characteristics (e.g. make, model and mileage) and deal characteristics and, as the primary criteria, CONA’s proprietary scoring model. CONA may require receipt of supplementary documents such as proof of income and proof of residence.
The proprietary scoring model enables CONA to automate the credit decisioning and approval process. The standards utilized by the model may be adjusted pursuant to the terms of the underwriting criteria to reflect the applicable circumstances of a particular obligor and the related receivable. For example, the underwriting criteria may allow a higher LTV for an obligor with a lower payment-to-income ratio.
In limited circumstances, certain contracts may not be within the parameters of the underwriting policies but may be approved by CONA personnel with appropriate credit authority as an exception to the underwriting criteria based on a judgmental evaluation. CONA’s credit-risk management monitors exceptions to the underwriting criteria continuously using an automated tracking tool. None of the receivables to be sold to the issuing entity on the closing date were approved as an exception to CONA’s underwriting criteria.
The underwriting criteria are continuously reviewed and updated in response to macroeconomic conditions, business strategy and/or portfolio performance.
Servicing
CONA, operating through its COAF division, will be the servicer. CONA has been servicing motor vehicle receivables since 2001. CONA will service the receivables in accordance with its customary servicing practices and will be responsible for managing, administering, servicing and making collections on the receivables.
Obligors may make payments through a variety of methods, which may be modified periodically, including mail payment, automatic withdrawal, the mobile application, wire transfer, check-by-phone (both through an inbound voice response unit and through a live associate) and, in the future, via debit card with a third-party service provider. The servicer also utilizes third parties
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to provide services such as payment processing, insurance processing, bankruptcy processing, title perfection services and recovery of deficiency balances.
Collections
The servicer utilizes several methods to contact delinquent customers, including phone contact, letters, e-mail, phone messages and automated systems such as computer-controlled phone dialing systems. The servicer also utilizes third parties to provide certain collections services.
The servicer’s collection system provides relevant obligor information and records of all receivables, maintains a record of an obligor’s promise to pay and affords supervisors the ability to review collection personnel activity and to modify collection priorities with respect to contracts. The servicer may charge (or waive, at its discretion) late fees and other administrative fees or similar charges allowed by applicable law with respect to any receivable.
Loss Mitigation
Under some circumstances, the servicer, at its own discretion, may permit an extension on or deferral of payments due on receivables on a case-by-case basis or may permit extensions or deferrals more broadly in accordance with its customary servicing practices, e.g. in connection with a natural disaster affecting a large group of obligors.
Repossession and Remarketing
The decision to repossess the collateral generally depends upon the delinquency status and other risk characteristics of the account. The servicer will generally initiate repossession of the financed vehicle based on a proprietary algorithm that considers the number of days the account is delinquent and certain other factors relating to the receivable and the obligor.
Repossessions are conducted by third parties selected by the servicer who are engaged in the business of repossessing vehicles for secured parties. The servicer has relationships with a wide range of repossession agencies nationwide that are familiar with the unique repossession laws of the jurisdictions in which they operate.
When motor vehicles are repossessed, they are generally sold at various auctions across the country. Upon repossession and sale of a financed vehicle, the servicer will determine whether to pursue a deficiency judgment in accordance with its customary servicing practices and the requirements of applicable law.
The servicer uses a combination of dedicated internal departments and third parties to pursue bankruptcy and, if applicable, deficiency recovery against obligors who have defaulted on their receivables and legal recourse to secure a vehicle when self-help repossession efforts have failed. The servicer has a dedicated skiptracing department that utilizes both internal and external resources to find obligors and the collateral if a delinquent obligor and the related financed vehicle cannot be located.
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Appendix 2: ESG Relevance Score
SF ESG Navigator
Credit-Relevant ESG Derivation
Environmental (E)
E Score
Social (S)
S Score
Governance (G)
G Score Sector-Specific Issues
Transaction data and periodic reporting
Macroeconomic factors and sustained structural shifts in secular
Assets' energy/fuel efficiency and impact on valuation
Reference
Sector-Specific Issues Reference
n.a.
Overall ESG Scale
5 issues
not a rating
driver
Capital One Prime Auto Receivables Trust 2021-1 has exposure to macroeconomic factors and sustained structural shifts in secular preferences affecting consumer behavior but this has very low impact
on the rating.
Governance is minimally relevant to the rating and is not currently a driver.
5 issues
4 issues
Irrelevant to the transaction or program ratings; relevant to the sector.
Irrelevant to the transaction or program ratings; irrelevant to the
sector.
How to Read This Page
ESG scores range from 1 to 5 based on a 15-level color gradation.
Red (5) is most relevant and green (1) is least relevant.
The Environmental (E), Social (S) and Governance (G) tables
break out the individual components of the scale. The right-hand box
shows the aggregate E, S, or G score. General Issues are relevant
across all markets with Sector-Specific Issues unique to a particular
asset class. Scores are assigned to each sector-specific issue. These
scores signify the credit-relevance of the sector-specific issues to the
transaction’s or program’s overall credit rating. The Reference box
highlights the factor(s) within which the corresponding ESG issues are
captured in Fitch's credit analysis.
The Credit-Relevant ESG Derivation table shows the overall ESG
score. This score signifies the credit relevance of combined E, S and
G issues to the transaction’s or program’s credit rating. The three
columns to the left of the overall ESG score summarize the
transaction’s or program’s sub-component ESG scores. The box on
the far left identifies some of the main ESG issues that are drivers or
potential drivers of the transaction’s or program’s credit rating
(corresponding with scores of 3, 4 or 5) and provides a brief
explanation for the score.
Classification of ESG issues has been developed from Fitch's sector
ratings criteria. The General Issues and Sector-Specific Issues draw
on the classification standards published by the Sustainability
Accounting Standards Board (SASB).
5
4
3
2
1
How relevant are E, S and G issues to the overall credit rating?
CREDIT-RELEVANT ESG SCALE - DEFINITIONS
Highly relevant; a key transaction or program rating driver that has a
significant impact on an individual basis.
Relevant to transaction or program ratings; not a key rating driver but
has an impact on the ratings in combination with other factors.
Minimally relevant to ratings; either very low impact or actively
mitigated in a way that results in no impact on the transaction or
program ratings.
E Scale
GHG Emissions & Air Quality
issues
driver
Capital One Prime Auto Receivables Trust 2021-1 has 5 ESG potential rating drivers
0
Transaction & Collateral Structure
Transaction Parties & Operational Risk
issues
potential driver
key driver 0
2
5
4
3
1
Asset Isolation and Legal Structure; Asset Quality; Rating Caps;
oversight; foreclosure laws; government support and intervention
Labor practices, pension obligations and related litigation
General Issues Reference
Asset Quality; Surveillance 4
3
Asset Quality; Surveillance
Energy Management
Water & Wastewater Management
n.a.
Asset, operations and/or cash flow exposure to extreme weather
events and other catastrophe risk, including but not limited to
flooding, hurricanes, tornadoes, and earthquakes
5
Sector-Specific Issues
Regulatory risks, fines, or compliance costs related to emissions,
energy consumption and/or related reporting standards
n.a.
Compliance with consumer protection related regulatory
requirements, such as fair/transparent lending, data security, and
safety standards
Operational Risk; Surveillance
##
ABS - AutoCapital One Prime Auto Receivables Trust 2021-1
1
2
2
1
1
2
1
2
2
1
3
3
3
3
3
Customer Welfare - Fair Messaging,
Privacy & Data Security
4
3
2
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