STRUCTURED FINANCE

Special Report

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto Credits
Shifting Out of Neutral into Drive?
AUTHORS: Annika Sandback Vice President Senior Analyst (212) 553-1482
Annika.Sandback @moodys.com

CONTENTS:

Yan Yan Associate Analyst (212) 553-4083 CONTACTS:

Yan.Yan@moodys.com

Milton C hacon Managing Director (212) 553-7846 Jay Eisbruck Managing Director (212) 553-4377 Linda Stesney Managing Director (212) 553-3691

Opinion and Outlook 2004 Review - Issuance Activity - Credit and Performance Trends - Recurring Theme: Is the Deep Subprime Market Underserved? 2005 Outlook - Issuance Outlook - Credit Quality Outlook - Performance Outlook

OPINION AND OUTLOOK

Public and private issuance of subprime and near-prime automobile ABS is expected to increase by approximately 26%, or $4.9 billion, to reach $23.7 billion in 2005, based upon issuers' forecasts of loan originations growth in an improving economy. The credit quality of subprime and near-prime auto loan pools is expected to remain essentially unchanged in 2005 from that of pools securitized in 2004, as most issuers appear to have completed the tightening of underwriting that has taken place in the recent past. It remains to be seen, however, whether, in the glow of an improving economy, issuers will begin to loosen their credit standards and originate loans of somewhat weaker credit quality than what we saw in 2003 and 2004. Moody's expects that the performance of pools that were securitized in 2003 and 2004 will continue strong through 2005. Performance of 2005 originations that are securitized should be strong so long as the appeal of loosening credit standards does not prove too alluring to issuers. In 2004, public issuance rated by Moody's declined by 7% to $17.2 billion from $18.5 billion in 2003. Total issuance, including private transactions, fell by a slightly higher percentage (9%) to $18.8 billion, as private transaction volume dropped by almost 24% year-over-year. The decline in total volume in 2004 marks a distinct departure from 2002's record $25.5 bil-

Milton.Chacon@moodys.com

Jay.Eisbruck@moodys.com

Linda.Stesney@moodys.com

Kumar K anthan Senior Vice President (212) 553-1428 Brett H emmerling Investor Liaison (212) 553-4796
Brett.Hemmerling @moodys.com

Kumar.Kanthan@moodys.com

WEBSITE:
www.moodys.com

January 13, 2005

lion and 2003's $20.6 billion (the second-highest year ever for the sector). Total volume in 2004 was roughly equivalent to the levels seen back in 2000 and 2001. As was the case in 2003, during 2004 most lenders continued to focus on credit quality at the expense of volume in response to a stronger, yet still not robust, economic environment. The primary driver of 2004's volume decline was large decreases in ABS issuance by several issuers, including Triad, Household and Onyx. Partially offsetting this was an increase in volume from issuers such as Capital One and Long Beach, and the relatively flat issuance volumes of a handful of other issuers. However, for the most part, the overall issuance decline was not due to decreases in origination volume, but rather to transaction timing or the use by issuers of alternative financing sources. The past year saw some modest changes in the competitive landscape. The major story was Capital One's purchase of Onyx, which is expected to close in the first quarter of 2005. In addition, CPS purchased SeaWest and subsequently ceased new loan originations under the SeaWest platform. The credit performance of subprime and near-prime auto loan pools strengthened considerably in 2004. Due, in large part, to an improving macroeconomic climate, including a firming up of used car values, Moody's subprime auto credit indexes registered improving loss performance throughout 2004, as did most individual issuers' pools securitized in 2003 and 2004. The overall US macroeconomic picture looks fairly bright, with unemployment and personal bankruptcies falling and interest rates expected to rise only modestly during the course of 2005. Given that the strengthening in some of these macroeconomic indicators is still recent, however, subprime lenders may be well advised to use caution before loosening credit standards in 2005 in order to gain volume.

2004 REVIEW Issuance Activity

Issuance Drops by 9% in Second Consecutive Down Year

Total issuance of subprime and near-prime1 automobile ABS issuance rated by Moody's,2 including both public and private transactions, fell 9% in 2004 from 2003's $20.6 billion to $18.8 billion. This reduction marks the second consecutive down year in issuance since the sector endured a shakeout3 along with the resulting volume reduction back in 1998. Volume in 2004 was roughly equivalent to levels seen in 2000 and 2001. (See Figures 1 and 2.)
Major Issuers Continue to Dominate; Triad Drops Out of Top Six as Long Beach Debuts

The six major issuers that dominate the subprime and near-prime market segment changed complexion in 2004 as Triad fell out while Long Beach made its debut. (See Appendix 4 for the top six issuers by dollar volume rated by Moody's.) The primary driver of the volume decline in 2004 was large decreases in ABS issuance by several issuers, which was somewhat offset by either increased or stable volume from others. However, for the most part, the overall issuance decline was not due to decreases in origination volume, but rather to transaction timing or the use by issuers of alternative financing sources. The top six issuers' share of 2004 volume was essentially unchanged from 2003 (at 80% versus 83%), considerably lower than the peak of 91% reached in 2002, but the top three issuers' dominance increased to 65%, a level not seen since 2000/2001. (See Figure 3.)

1 2 3

See Appendix 1 for a definition of the subprime and near-prime auto market categories. Since Moody's rates 100% of the transactions issued in the public market and a significant portion of the transactions issued in the private market, the total volume of Moody's-rated transactions is a good proxy for total subprime and near-prime issuance. The shakeout, which began in earnest in 1997 and remained in full force through 1998, has been described in previous Review/Outlook publications for the sector.

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 2

Two subprime auto lenders completed their first Moody's-rated term securitizations in 2004. In March, Wells Fargo Financial, Inc., a subsidiary of Wells Fargo & Company, executed its first transaction, at $470 million, employing a senior/sub structure; and in September, United Auto Credit Corporation (UACC), a subsidiary of United PanAm Financial Corp., closed a $420 million wrapped transaction.
Figure 1

Subprime and Near-Prime Automobile ABS Issuance

(Total Term Issuance Rated by Moody's)
30.0 25.0 $ Volume in Billions Number of Deals 20.0 15.0 10.0 5.0 0.0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 $ Volume No. of Deals 0 25 50 75

(Total Term Issuance Rated by Moody's: Public vs. Nonpublic)

25.0 20.0 $ Volume in Billions 15.0 10.0 5.0 0.0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Public Nonpublic

Subprime and Near-Prime Automobile ABS Issuance

Figure 2

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 3

Subprime and Near-Prime Automobile ABS Issuance

(Top Issuers as % of Total Issuance)
100% 90% % of Total Issuance 80% 70% 60% 50% 40% 1997 1998 1999 2000 2001 2002 2003 2004

Figure 3

Top 3 Issuers' % of Total Issuance

Top 6 Issuers' % of Total Issuance

Credit and Performance Trends

Pool Performance Improves

After weak performance for most of 2001 through 2003, Moody's Static Chargeoff Indexes4 began to show signs of performance stabilization in the last two months of 2003. In the first quarter of 2004, subprime auto loan pools began to show sustained signs of performance improvement. This continued throughout the year. In fact, according to a new index measure added to Moody's Subprime Auto Indexes in the second quarter of 2004, the annualized net loss rates for the high-loss, low-loss and allpools categories declined for the third quarter in a row, and were 26% to 50% lower than a year earlier. In the third quarter of 2004, the annualized net loss rates for all categories declined between 19% and 46% compared with the same quarter in 2003. The latest performance trends as gauged by the index values seem to indicate that the improving US economy has positively impacted the performance of subprime auto loans in terms of frequency of loss. Performance has also been aided by the recent stabilization of used car values, which has helped to reduce severity of loss. A recent analysis conducted at the deal vintage level5 by Moody's for the top six major issuers reveals that, while many issuers' 2000 through 2002 vintages have shown relatively weak performance relative to their 1999 vintages (with some having reached or exceeded the loss levels of their historically worstperforming 1997 vintages), the 2003 and 2004 vintages of most of the top six are showing a great deal of improvement (see Figures 4 to 9).

4 5

See Moody's monthly and quarterly Subprime Auto Loan Credit Indexes. For a detailed explanation of the construction of the indexes, see "Gauging Subprime Auto Loan Transactions: Moody's Unveils New Credit Indexes," Moody's Structured Finance, June 13, 1997. The vintage analysis was conducted at the issuer level by taking a straight (i.e., unweighted) average of the cumulative net loss performance for each issuer's deals that closed in a given year. For example, the performance of each of an issuer's individual deals that closed in 2000 was averaged to form the issuer's 2000 vintage performance.

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 4

WFS Deals - Vintage Analysis

6.00 5.00 Cumulative Net Loss (%) 4.00 3.00 2.00 1.00 0.00 6 12 1997 2001 18 24 1998 2002 30 36 1999 2003 42 48 2000 1H04 Seasoning (Months Since Closing)

Figure 4

AmeriCredit Deals - Vintage Analysis

16.00 14.00 Cumulative Net Loss (%) 12.00 10.00 8.00 6.00 4.00 2.00 0.00 6 12 1997 2001 18 24 1998 2002 30 1999 2003 36 42 2000 1H04 48 Seasoning (Months Since Closing)

Figure 5

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 5

Capital One/Summit Deals - Vintage Analysis

16.00 14.00 Cumulative Net Loss (%) 12.00 10.00 8.00 6.00 4.00 2.00 0.00 6 12 1997 2002 18 1998 2003 24 1999 30 2000 36 42 2001 Seasoning (Months Since Closing)

Figure 6

Onyx Deals - Vintage Analysis

7.00 6.00 Cumulative Net Loss (%) 5.00 4.00 3.00 2.00 1.00 0.00 6 12 1997 2001 18 1998 2002 24 30 1999 2003 36 2000 1H04 42 Seasoning (Months Since Closing)

Figure 7

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 6

Long Beach - Vintage Analysis

14.00 12.00 Cumulative Net Loss (%) 10.00 8.00 6.00 4.00 2.00 0.00 6 12 1997 2001 18 1998 2002 24 30 1999 2003 36 42 2000 1H04 Seasoning (Months Since Closing)

Figure 8

Household Deals - Vintage Analysis

18.00 16.00 Cumulative Net Loss (%) 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 6 12 1997 2002 18 1998 2003 24 30 1999 36 2000 42 48 2001 Seasoning (Months Since Closing)

Figure 9

Stock Prices Fare Well, but Pale in Comparison to 2003's Rebound

After several years of disappointing share performance, the stock prices of most public companies in the subprime auto finance sector increased sharply in 2003. This rebound was primarily a reflection of how low stock prices had previously fallen. In 2004, stock prices fared well, but in terms of year-over-year comparisons, did not perform nearly as well as in 2003. Among the standouts in 2004 were Onyx and WFS, both of which saw their stocks surpass their previous all-time highs during the course of 2004. Both Credit Acceptance and United PanAm also ended the year close to their all-time highs.

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 7

The smaller percentage increases in 2004 relative to the 2003 increases (with the exception of Onyx) still outpaced the overall market, which ended the year at a level only moderately higher than at the year's outset. This appears to be an indication of the equity market's belief that the industry's prospects for 2005 continue to be positive.

Stock Price History of Subprime and Near-Prime Auto Finance Companies

As of December 31, 2004

Figure 10

Company Name AmeriCredit Corp. Consumer Portfolio Services Credit Acceptance Corp. Onyx Acceptance Corp. WFS Financial United PanAm Financial
*As of December 31, 2004

Symbol ACF CPSS CACC ONYX WFSI UPFC

Price Dec-31-04 $24.45 4.87 25.45 27.96 50.56 19.06

1 Yr Change 53% 31% 66% 137% 19% 14%

Change vs. All-Time High -62% -73% -11% 0% 0% -7%

All-Time High* $63.63 17.88 28.75 28.00 50.67 20.42

Rating Actions: 8 Tranches Upgraded, None Downgraded

In 2004, seven tranches of four AmeriCredit senior/sub transactions were upgraded (one tranche was upgraded twice), as was one tranche of a WFS transaction. (See Appendix 5 for details.) The upgrades reflect a strengthening in the credit profile of the upgraded securities, based upon a build-up of credit enhancement relative to expected future losses in the underlying receivables pools. Otherwise it was a quiet year, with no downgrades and no transactions placed on review for possible downgrade in 2004.
Recurring Theme: Is the Deep Subprime Market Underserved?

A refrain heard often in the recent past from some subprime market players is that the "deep" segment of their market has become underserved. This segment is typically thought to comprise borrowers with the weakest credit quality. Loans to these borrowers both experience the highest loss rates but also often produce the highest returns. Beginning in the late 2001 to 2002 timeframe and continuing through the early part of 2004, most subprime auto lenders were faced with the highly unusual "double whammy" of increased frequency of loss due to weak macroeconomic conditions and higher severity of loss due to a weak used car market. The strategy employed by many of these lenders in the face of these market conditions was to tighten credit guidelines and move up-market within the subprime space in order to slow the pace of losses. As the bigger players move out, there are smaller, niche players who perhaps can fill the deep subprime market space, if in fact it is currently underserved. However, the question remains as to whether those who pulled back from the deep subprime market segment in times of economic weakness, uncertainty, or even gradual improvement, will continue to hold the reins as tightly if the economy improves further in 2005 and the used car market remains stable. If loans are priced correctly for the inherent risk, this may be a tempting strategy. And if it occurs, even if only incrementally, we may well see somewhat weaker pools securing some subprime securitizations, which would inevitably lead to weaker performance.

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 8

2005 OUTLOOK Issuance Outlook

Public and private issuance of subprime and near-prime automobile ABS is expected to increase by approximately 26%, or $4.9 billion, to reach $23.7 billion in 2005. This figure is based on issuers' own forecasts of loan originations growth, which they believe will be driven by relatively strong macroeconomic conditions in the coming year as well as transaction timing.

Credit Quality Outlook

The credit quality of subprime and near-prime auto loan pools originated in 2005 is expected to remain essentially unchanged from that of pools securitized in 2004, as most issuers appear to have completed the tightening of underwriting standards that took place in the recent past. It still remains to be seen whether, in the glow of an improving economy, issuers will begin to loosen their credit standards and originate loans of somewhat weaker credit quality than what we saw in 2003 and 2004. Key factors informing Moody's outlook on credit quality include the following: Unemployment is falling: The US unemployment rate fell during the course of 2004 from an average of 6.0% in 2003 to 5.4% in November 2004. According to Moody's Chief Economist, John Lonski6, even if the US economy were to slow somewhat in 2005, as is expected, the annual growth rate of real GDP should still be sufficient to lower November's 5.4% unemployment rate to 5.1% by year-end 2005. Profits are likely to increase sufficiently in 2005 to widen profit margins and extend a corporate cycle upturn, which should boost payrolls. The unemployment rate will be watched closely, as a key driver of defaults on subprime auto loans is a shock to household liquidity, which often can be the result of job loss. Interest rates are not expected to rise precipitously: As the most significant consequence of rising interest rates is the impact on the consumer debt burden and consequent consumer default likelihood, the predicted environment in 2005 of only modestly higher long-term interest rates is good news, relatively speaking, for consumer lenders. Personal bankruptcy filings are falling: As of the third quarter of 2004, the rate of personal bankruptcy filings had fallen meaningfully from the high levels of 2002 through the first half of 2003. In the second half of 2003, there were signs of stabilization followed by improvement. As of the third quarter of 2004, there had been four consecutive quarters of year-over-year decreases in personal bankruptcy filings. (See Figure 11.)

Source: Chief Economist John Lonski's commentary in the December 6, 13 and 20 issues of "Credit Trends Weekly Commentary," Moody's Investors Service Global Credit Research.

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 9

Non-Business Bankruptcy Filings per Quarter

Year-Over-Year Percentage Change
30.0% 25.0% Year to Year % Change 20.0% 15.0% 10.0% 5.0% 0.0% -5.0%

Chart 11

1Q 01

2Q 01

3Q 01

4Q 01

1Q 02

2Q 02

3Q 02

4Q 02

1Q 03

2Q 03

3Q 03

4Q 03

1Q 04

2Q 04

Source: American Bankruptcy Institute

Given the relatively recent strengthening in some of these macroeconomic indicators, however, subprime lenders may be well advised to use caution before loosening their credit standards in 2005 in order to gain volume.

Performance Outlook
The performance of pools that were securitized in 2003 and 2004 is expected to stay strong in 2005. Performance of 2005 originations that are securitized should be strong so long as the appeal of loosening credit standards does not prove too alluring to issuers. Aiding pool performance should be a lower frequency of loss as a result of the improved economic conditions described above. In addition, Moody's expects that severity of loss will remain stable as a function of a stable used car market.

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 10

3Q 04

APPENDIX 1 Moody's Definition of the Subprime Auto Market

Credit Category Prime Near-Prime Subprime "EZ
1
7 8 9 10

Implied Credit Grade A+ to B B- to C+ C to CD+ to DE to Z

Static Pool Losses (%) <3 3-7 7-15 15-25 25-50

Discounts (%) None None <10 10-30 30-50

Underwriting Bankruptcy Length of Clean1 Tolerance Credit None > 5 yrs >2 yrs Discharged 2-5 yrs 1-2 yrs Discharged 1-2 yrs < 1 yr Discharged < 1 yr Irrelevant None

"Clean" credit is a relative term, and its meaning changes depending on the credit category.

APPENDIX 2 Moody's Current Classification of Active Issuers7 by Credit Category Near-Prime Sub-Prime8 Franklin Capital AmeriCredit 9 Long Beach Capital One Auto Finance10 Onyx CPS WFS Credit Acceptance Drive Financial DriveTime Household Auto Finance Prestige Triad United Pan Am Wells Fargo Financial APPENDIX 3 Historical Number and Dollar Volume Subprime and Near-Prime Auto Deals Rated by Moody's Public Nonpublic Total Public Deals (#) Deals (#) Deals (#) Vol. ($bn) 1991 2 1 3 0.3 1992 1 3 4 0.2 1993 8 4 12 1.1 1994 9 11 20 1.8 1995 20 17 37 5.0 1996 34 32 66 8.6 1997 41 31 72 11.9 1998 31 18 49 10.4 1999 25 10 35 12.8 2000 22 12 34 16.0 2001 21 13 34 18.4 2002 26 12 38 23.8 2003 23 17 40 18.5 2004 23 12 35 17.2 2005E 27 15 42 21.5
7 8 9 10

Nonpublic Vol. ($bn) 0.0 0.1 0.1 0.4 1.0 1.8 2.1 1.4 1.1 2.1 1.8 1.8 2.1 1.6 2.2

Total Vol. ($bn) 0.3 0.2 1.3 2.2 6.0 10.4 14.0 11.8 13.9 18.2 20.1 25.5 20.6 18.8 23.7

Active issuers, for the purpose of this table, are defined as those that have issued auto ABS rated by Moody's in 2004 and are still originating auto loans. For simplicity's sake, the EZ credit category has been rolled into the subprime category. Long Beach has been reclassified into the near-prime category, consistent with the expected performance of its most recent transactions. Earlier transactions have exhibited a level of credit losses consistent with subprime pools. Capital One also originates prime auto loans, which are securitized separately from their nonprime originations.

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 11

APPENDIX 4 Top Six Issuers by Dollar Volume Rated by Moody's 2004 1 2 3 4 5 6 2002 1 2 3 4 5 6 2000 1 2 3 4 5 6 Issuer WFS AmeriCredit Capital One Onyx Long Beach Household Issuer AmeriCredit WFS Household Capital One Onyx Triad Issuer AmeriCredit WFS Household Associates Onyx UAC Vol ($mil) 5,865.0 3,775.0 2,500.0 1,350.0 900.0 750.0 Vol ($mil) 7,390.0 6,150.0 3,600.0 3,253.1 1,750.0 1,184.4 Vol ($mil) 4,695.0 4,535.0 1,944.7 1,800.0 1,720.0 1,327.0 2003 1 2 3 4 5 6 2001 1 2 3 4 5 6 1999 1 2 3 4 5 6 Issuer WFS AmeriCredit Capital One Triad Household Onyx Issuer AmeriCredit WFS Household Capital One Onyx UAC Issuer AmeriCredit WFS Arcadia Onyx UAC Household Vol ($mil) 5,889.4 3,940.0 2,125.0 1,843.0 1,799.0 1,600.0 Vol ($mil) 7,739.0 3,570.0 2,180.0 2,127.8 1,600.0 897.3 Vol ($mil) 3,600.0 2,500.0 1,800.0 1,450.0 1,328.3 662.3

APPENDIX 5 2004 Rating Actions Taken on Subprime and Near-Prime Auto Deals Rated by Moody's Transaction AmeriCredit Automobile Receivables Trust 2000-1 AmeriCredit Automobile Receivables Trust 2000-1 AmeriCredit Automobile Receivables Trust 2001-1 AmeriCredit Automobile Receivables Trust 2001-1 AmeriCredit Automobile Receivables Trust 2001-1 AmeriCredit Automobile Receivables Trust 2001-1 AmeriCredit Automobile Receivables Trust 2002-1 AmeriCredit Canada Automobile Receivables Co-Ownership Certificates, Series 2002-A WFS Financial 2003-2 Owner Trust Tranche Class B Class C Class B Class B Class C Class D Class B Class B Rating Action Upgraded from Aa3 to Aaa Upgraded from A3 to Aa3 Upgraded from Aa3 to Aa2 Upgraded from Aa2 to Aaa Upgraded from A3 to Aa1 Upgraded from Baa3 to Baa2 Upgraded from Aa3 to Aa2 Upgraded from A2 to Aa2 Date 2/24/04 2/24/04 2/24/04 12/22/04 12/22/04 12/22/04 12/22/04 12/22/04 12/22/04

Class D Upgraded from Baa2 to Baa1

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 12

PAGE INTENTIONALLY LEFT BLANK

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 13

PAGE INTENTIONALLY LEFT BLANK

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 14

PAGE INTENTIONALLY LEFT BLANK

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 15

Doc ID# SF49230

Copyright 2005, Moodys Investors Service, Inc. and/or its licensors including Moodys Assurance Company, Inc. (together, MOODYS). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODYS PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODYS from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, such information is provided as is without warranty of any kind and MOODYS, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall MOODYS have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODYS or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODYS is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODYS IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling. MOODYS hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODYS have, prior to assignment of any rating, agreed to pay to MOODYS for appraisal and rating services rendered by it fees ranging from $1,500 to $2,400,000. Moodys Corporation (MCO) and its wholly-

2004 Review and 2005 Outlook: Subprime and Near-Prime Auto

Moodys Investors Service 16