santander drive auto receivables trust 2019-3 · - santander consumer usa inc.'s (sc's;...

Presale:

Santander Drive Auto Receivables Trust 2019-3August 7, 2019

Preliminary Ratings

ClassPreliminaryrating Type Interest rate(i)

Preliminary amount(mil. $)(i)

Legal finalmaturity date

A-1 A-1+ (sf) Senior Fixed 194.00 Aug. 17, 2020

A-2-A/A-2-B(ii) AAA (sf) Senior Fixed/floating 260.00 Feb. 15, 2022

A-3 AAA (sf) Senior Fixed 111.91 Nov. 15, 2022

B AA (sf) Subordinate Fixed 133.29 Sept. 15, 2023

C A- (sf) Subordinate Fixed 181.22 Oct. 15, 2025

D BBB- (sf) Subordinate Fixed 119.84 Oct. 15, 2025

E(iii) NR Subordinate 95.88 Dec. 15, 2026

Note: This presale report is based on information as of Aug. 7, 2019. The ratings shown are preliminary. Subsequent information may result inthe assignment of final ratings that differ from the preliminary ratings. Accordingly, the preliminary ratings should not be construed asevidence of final ratings. This report does not constitute a recommendation to buy, hold, or sell securities. (i)The interest rates and the actualsize of the tranches will be determined on the pricing date. (ii)The class A-2-A notes will be issued as fixed-rate notes, and the class A-2-Bnotes will be issued as floating-rate notes. The initial principal balance allocation between the class A-2-A and A-2-B notes will be determinedon the pricing date. The sponsor does not expect the initial principal balance of the class A-2-B notes to exceed $130.00 million. (iii)The class Enotes will not initially be offered or rated. NR--Not rated. N/A--Not applicable.

Profile

Expected closing date Aug. 21, 2019.

Collateral Subprime auto loan receivables.

Originator, sponsor, servicer, andadministrator

Santander Consumer USA Inc., a subsidiary of Santander Holdings USA Inc.(BBB+/Stable/A-2).

Depositor Santander Drive Auto Receivables LLC.

Structuring lead manager J.P. Morgan Securities LLC.

Indenture trustee Wells Fargo Bank N.A. (A+/Stable/A-1).

Owner trustee Wilmington Trust N.A. (A/Stable/A-1).

Presale:

Santander Drive Auto Receivables Trust 2019-3August 7, 2019

PRIMARY CREDIT ANALYST

Jenna Cilento

New York

(1) 212-438-1533

[email protected]

SECONDARY CONTACT

Peter W Chang, CFA

New York

(1) 212-438-1505

[email protected]

www.standardandpoors.com August 7, 2019 1

© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimeron the last page.

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mailto: [email protected]




Credit Enhancement Summary

SDART2019-3

SDART2019-2(i)

SDART2019-1

SDART2018-5

SDART2018-4

SDART2018-3

Subordination (% of the initial receivables)

Class A 45.35 45.70 45.50 45.50 37.85 43.30

Class B 33.95 34.70 34.60 34.60 27.00 32.60

Class C 18.45 20.90 21.15 21.15 13.30 19.00

Class D 8.20 8.50 9.15 9.15 0.00 6.75

Class E 0.00 0.00 0.00 0.00 N/A 0.00

Overcollateralization (% of initial receivables)

Initial 6.25 5.50 6.25 6.25 14.00 8.00

Target(ii) 12.25 10.00 12.25 12.25 22.00 14.00

Floor 2.00 1.50 1.50 1.50 2.00 1.50

Reserve fund (% of the initial receivables)

Initial 1.00 1.00 1.00 1.00 1.00 1.00

Target 1.00 1.00 1.00 1.00 1.00 1.00

Floor 1.00 1.00 1.00 1.00 1.00 1.00

Total initial hard credit enhancement (% of the initial receivables)

Class A 52.60 52.20 52.75 52.75 52.85 52.30

Class B 41.20 41.20 41.85 41.85 42.00 41.60

Class C 25.70 27.40 28.40 28.40 28.30 28.00

Class D 15.45 15.00 16.40 16.40 15.00 15.75

Class E 7.25 6.50 7.25 7.25 N/A 9.00

Total target hard credit enhancement (% of the current receivables)(ii)

Class A 58.60 56.70 58.75 58.75 62.85 58.30

Class B 47.20 44.70 47.85 47.85 52.00 47.60

Class C 31.70 31.90 34.40 34.40 38.30 34.00

Class D 21.45 19.50 22.40 22.40 25.00 21.75

Class E 13.25 11.00 13.25 13.25 N/A 15.00

Excess spread per year(estimated %)(iii)

9.21 9.79 9.75 9.58 9.20 9.57

(i)We did not assign ratings to SDART 2019-2. (ii)For series 2018-3, the target overcollateralization is 14.00% of the outstanding pool balance.The target overcollateralization will increase to 23.00% of the current pool balance if the CNL triggers are breached. The targetovercollateralization for the series 2018-4 transaction is 22.00% of the outstanding pool balance plus 2.00% of the initial pool balance. Thetarget overcollateralization for series 2018-4 will decrease to 21.00% of the current pool balance plus 2.00% of the initial receivables once theclass A-2-B notes are paid off. For 2018-5 and 2019-1, the target overcollateralization steps down to 11.25% of the current pool balance afterthe floating-rate class A-2-B notes are paid down or if the A-2-B notes are not offered. The target overcollateralization for the series 2019-3transaction is 12.25% of the outstanding pool balance plus 2.00% of the initial pool balance. The target overcollateralization for series 2019-3will decrease to 11.25% of the current pool balance plus 2.00% of the initial receivables once the class A-2 notes are paid off. Series 2018-4,2018-5, 2019-1, 2019-2, and 2019-3 do not have a CNL trigger. Series 2018-4, 2018-5, 2019-1, 2019-2, and 2019-3 do not have a CNL trigger.(iii)Includes the 3.0% servicing fee. SDART--Santander Drive Auto Receivables Trust. CNL--Cumulative net loss. N/A--Not applicable.



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Presale: Santander Drive Auto Receivables Trust 2019-3

Rationale

The preliminary ratings assigned to Santander Drive Auto Receivables Trust 2019-3's (SDART2019-3's) $1.096 billion automobile receivables-backed notes reflect:

- The availability of approximately 53.9%, 46.5%, 35.2%, and 27.5%, of credit support for theclass A, B, C, and D notes, respectively, based on stress cash flow scenarios (including excessspread), which provide coverage of approximately 3.30x, 2.85x, 2.07x, and 1.63x our15.50%-16.25% expected cumulative net loss (CNL; see the Cash Flow Modeling section formore information).

- The timely interest and principal payments made under stressed cash flow modeling scenariosappropriate to the assigned ratings.

- Our expectation that under a moderate ('BBB') stress scenario (1.7x our expected loss level), allelse being equal, our ratings on the class A-2-A/A-2-B, A-3, and B notes, will remain within onerating category of the assigned preliminary 'AAA (sf)', 'AAA (sf)', and 'AA (sf)' ratings,respectively, and our ratings on the class C and D notes will remain within two rating categoriesof the assigned preliminary 'A- (sf)' and 'BBB- (sf)' ratings, respectively, while they areoutstanding. These rating movements are within the limits specified by our credit stabilitycriteria (see "Methodology: Credit Stability Criteria," published May 3, 2010).

- Santander Consumer USA Inc.'s (SC's; the originator/servicer) long history of originating andservicing subprime auto loan receivables.

- Our analysis of over 10 years of static pool data on SC's lending programs.

- Over eight years of performance on SC's securitizations since it re-entered the asset-backedsecurities market in 2010.

- The transaction's payment, credit enhancement, and legal structures.

Changes From Series 2019-2 and 2019-1

The significant structural changes from SDART 2019-2 (which we did not rate) are:

- The overcollateralization floor increased to 2.00% from 1.50%.

- The total initial hard credit enhancement for classes A, D, and E increased to 52.60%, 15.45%,and 7.25% from 52.20%, 15.00%, and 6.50%, respectively, while total initial hard creditenhancement for class C decreased to 25.70% from 27.40%. The total initial hard creditenhancement for class B remained the same.

- Initial and target overcollateralization increased to 6.25% and 12.25% from 5.00% and 10.00%,respectively.

- The subordination for the classes A, B, C, and D decreased to 45.35%, 33.95%, 18.45%, and8.20%, respectively, from 45.70%, 34.70%, 20.90%, and 8.50%.

The significant structural changes from SDART 2019-1 (the last SDART deal, which we rated) are:

- The overcollateralization floor increased to 2.00% from 1.50%.

- The total initial hard credit enhancement for classes A, B, C and D decreased to 52.60%,41.20%, 25.70%, and 21.45% from 52.75%, 41.85%, 28.40%, and 16.40%, respectively.



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- The subordination for the classes A, B, C, and D decreased to 45.35%, 33.95%, 18.45%, and8.20%, respectively, from 45.50%, 34.60%, 21.15%, and 9.15%.Excess spread decreased to9.21% (pre-pricing) from 9.75% (post-pricing).

- The target overcollateralization will step down to 11.25% plus 2.00% of the initial receivablesonce class A-2-A and A-2-B are paid down. For the 2019-1 transaction, the targetovercollateralization will step down to 11.25% once the floating-rate tranche (class A-2-B) ispaid down.

- While subordination and excess spread for series 2019-3 (based on preliminary pricing levels)have decreased since the series 2019-1 transaction, total credit enhancement for each classremains commensurate with the assigned ratings.

Consistent with series 2018-4, 2018-5, and 2019-1, series 2019-3 does not include a CNL trigger,which would cause the target overcollateralization to increase once breached. While earliertransactions (2018-3 and prior) included this trigger feature, those transactions generally did notbenefit from the trigger in our stressed cash flow runs because the overcollateralization typicallynever reached its initial target before tripping the trigger.

The significant collateral changes from SDART 2019-2 are:

- The percentage of loans with an original maturity of 73-75 months decreased to 16.18% from16.47%.

- The weighted average seasoning increased to 6.26 months from 2.00 months.

- The weighted average FICO increased to 619 from 600.

- The weighted average loan-to-value (LTV) ratio increased to 107.75% from 106.66%.

The significant collateral changes from SDART 2019-1 are:

- The percentage of loans with an original maturity of 73-75 months decreased to 16.18% from17.36%.

- The weighted average seasoning increased to 6.26 months from 3.95 months.

- The weighted average FICO increased slightly to 619 from 615.

- The weighted average loan-to-value (LTV) ratio increased to 107.75% from 106.90%.

- The new vehicle percentage decreased to 41.41% from 48.60%.

The pool appears overall to be slightly better credit quality than that of series 2019-1 and in linewith prior transactions. In addition, we considered the improvement we have observed in thesecuritization performance for the 2015 and 2017 vintages. As a result, we lowered our expectedCNL range for this transaction at 15.50%-16.25% (see the S&P Global Ratings' Expected Losssection).

Key Rating Considerations

We considered the following key strengths in rating this transaction:

- SCUSA, the originator/servicer of the assets, is owned by Santander Holdings U.S.A Inc.(SHUSA; BBB+/Stable/A-2). Further, we consider SHUSA a highly strategic subsidiary of BancoSantander S.A. (A/Stable/A-1) that would receive support from its parent, which owns 100% ofSHUSA, if needed (see "Santander Holdings U.S.A Inc.," published Aug. 10, 2018).



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- SCUSA has a long track record of originating and securitizing subprime auto loans.

- SCUSA's key officers have many years of experience in the auto business.

- The outstanding SDART transactions that we rated are performing in line or slightly better thanour original expectations (see table 5).

- SC has generally repurchased contracts from its securitized pools that have not made their firsttwo payments, and, beginning with the SDART 2017-2 transaction, they included arepresentation that each contract has or will have made their first two payments. If not, SC willrepurchase those contracts.

In addition to the strengths outlined above, we considered the following weaknesses andmitigating factors (to the extent applicable):

- Only 3.33% of the obligors in the pool have had their incomes verified. According to SC'smanagement, higher income verification levels do not necessarily indicate a better SC poolbecause SC verifies income on a risk-based approach. The loans with obligors with verifiedincomes have substantially lower FICO scores (591 versus 619) and higher LTVs (107.91%versus 107.75%) than those without verified incomes. While SC verifies obligor income on alower percentage of its loans than some other lenders, we believe the company's performanceand our expected CNL reflect this practice.

- Approximately 16.18% of the loans in the pool have original maturities of 73-75 months. Basedon SC data, these loans experience CNLs that are approximately 1.4x the level of SC's 12-60month loans. We believe SC has tried to limit the higher loss severity associated with theselonger-term loans because the weighted average LTV for them is 100.73% compared with107.75% for the overall pool and the weighted average loss forecast score (LFS) is 580compared with 550 for the overall pool. In our static pool analysis, we review the performance ofthese loans and project future losses on the outstanding vintages.

- The pool has a meaningful percentage of loans with no FICO score (approximately 12%),consistent with prior SDART pools.

- Since July 2014, the sponsor has received civil subpoenas and civil investigative demands fromvarious federal and state agencies, including from the Department of Justice, the SEC, and anexecutive committee representing the attorneys general of 30 states. These types ofinvestigations and proceedings could result in adverse consequences to SC. Indeed, in March2017, SC entered into settlements (aggregate amount of $26 million) with the attorneys generalof Massachusetts and Delaware to settle allegations that it facilitated the origination of certainMassachusetts and Delaware loans that it knew--or should have known--violated applicablestate consumer protection laws. The two states alleged that the obligors' income levels hadbeen inflated. The above settlement covered loans purchased in those states from 2009-2014.Since then, the company has expanded its dealer review process. The risk of default fromincome inflation is often detected during the loan's earliest stages (first two payments).Beginning with the series 2017-2 transaction, SC has included a representation that eachcontract has received or will have received its first two payments. If not, SC will repurchasethem, which it has consistently done.

- This transaction does not include a CNL trigger, which would increase the targetovercollateralization level if breached. However, our analysis of these triggers in previoustransactions has generally indicated that under stressed cash flow runs, the trigger does notbenefit the transaction because the transactions typically did not reach the initial targetovercollateralization level before breaching the trigger. As a result, there generally were notreleases of excess spread that the tripped trigger would capture.



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Transaction Overview

SDART 2019-3 will issue approximately $1.096 billion of asset-backed securities collateralized bysubprime retail automobile installment contracts.

The transaction is structured as a true sale of the receivables to Santander Drive Auto ReceivablesLLC (the depositor) from SC (the originator, sponsor, servicer, and administrator) and then toSDART 2019-3 (the issuer), which has pledged its interest in the receivables to the indenturetrustee on the noteholders' behalf.

In rating this transaction, S&P Global Ratings will review the legal matters that it believes arerelevant to its analysis, as outlined in its criteria (see chart 1 for the transaction structure).

Chart 1



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Transaction Structure

The SDART 2019-3 transaction incorporates the following structural features:

- A sequential-pay mechanism among the notes that results in increased credit enhancement forthe rated notes as the pool amortizes.

- Initial overcollateralization of 6.25% of the initial pool balance, which grows to a target levelusing any excess spread available after covering net losses, to pay principal on the outstandingnotes.

- The target overcollateralization of 12.25% plus 2.00% of the initial receivables, which will stepdown to 11.25% plus 2.00% of the initial receivables once class A-2-A and A-2-B are paid down.The overcollateralization floor is 2.00%.

- A nonamortizing reserve account that will hold 1.00% of the initial pool balance and will be fullyfunded at closing.

The series 2019-3 transaction documents include fallback language that closely follows therecommended contractual language published on May 31, 2019, by the Federal Reserve'sAlternative Reference Rates Committee (ARRC) for new issuances of LIBOR securitizations. In theevent of a LIBOR cessation and occurrence of a benchmark transition event, both as defined in thetransaction documents and by ARRC, the class A-2-B floating rate will be allowed to transitionfrom LIBOR as the benchmark rate. We currently do not expect the ultimate discontinuance ofLIBOR to have a material impact on the preliminary ratings as we expect the class A-2-Bfloating-rate notes will be fully repaid by the class' legal final maturity date or earlier (due to thetranche's short weighted average life) and the class' limited exposure to a floating-ratebenchmark (approximately 50% maximum as a percentage of the aggregate note balance). We willcontinue to monitor the events related to this topic as they evolve and evaluate potential impact toour ratings, if any.

Payment Structure

The notes will pay a fixed interest rate, except for class A-2-B, which will pay a floating interestrate. Interest and principal are scheduled to be paid to the rated notes on each monthlydistribution date on the 15th day of each month or the next business day, beginning Sept. 15,2019. On each payment date, distributions will be made from available funds according to thepayment priority in table 1.

Table 1

Payment Waterfall

Priority Payment

1 To the indenture and owner trustees, any accrued and unpaid fees and any reasonable expenses not previouslypaid by the servicer, capped at $300,000 per year, in aggregate.

2 To the servicer, the servicing fee (3.00%) and all unpaid servicing fees with respect to previous periods.

3 To the class A noteholders, the accrued class A note interest due for the related interest period (paid pro rata).

4 The first principal allocation (the excess, if any, of the class A note balance over the pool balance).

5 To the class B noteholders, the accrued class B note interest due for the related interest period.



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Table 1

Payment Waterfall (cont.)

Priority Payment

6 The second principal allocation (the excess, if any, of the combined class A and B note balances over the poolbalance minus the first principal allocation).

7 To the class C noteholders, the accrued class C note interest due for the related interest period.

8 The third principal allocation (the excess, if any, of the combined class A, B, and C note balances over the poolbalance minus the first and second principal allocations).

9 To the class D noteholders, the accrued class D note interest due for the related interest period.

10 The fourth principal allocation (the excess, if any, of the combined class A, B, C, and D note balances over thepool balance minus the first, second, and third principal allocations).

11 To the class E noteholders, the accrued class D note interest due for the related interest period.

12 The fourth principal allocation (the excess, if any, of the combined class A, B, C, D and E note balances over thepool balance minus the first, second, and third principal allocations).

13 To the reserve account, any additional amounts required to make the cash on deposit in the reserve accountequal to the specified reserve account balance.

14 The regular principal allocation, if any (in this step, the notes are paid down to build to the overcollateralizationtarget).

15 To the certificate distribution account for the residual interestholder, any funds remaining.

Events Of Default

Under the indenture, the occurrence and continuation of any of the following constitutes an eventof default:

- A default in the interest payment on any of the controlling class' notes when due and payablethat continues for five or more business days.

- A default in the principal payment on any class of notes on the final scheduled payment orredemption date.

- The issuer fails to duly observe or perform its covenants or agreements.

- Any of the issuer's representations or warranties made under the indenture prove incorrect.

- The issuer files for bankruptcy.

Payment Priority After An Event Of Default

On each payment date after an event of default occurs, available funds will be distributed in thepriority shown in table 2.

Table 2

Payment Priority After An Event Of Default

Priority Payment

1 Any accrued and unpaid fees to the indenture and owner trustees.

2 The servicing fee (3.00%) and all unpaid servicing fees to the servicer.



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Table 2

Payment Priority After An Event Of Default (cont.)

Priority Payment

3 Interest, pro rata, to the class A noteholders.

4 If an acceleration of the notes occurs after or as a result of the event of default detailed in the first, second,or fifth bullets in the Events Of Default section above, pay in the following priority: principal to the class A-1noteholders until the notes are paid in full; then principal to the class A-2 and A-3 noteholders, pro rata,based on each class' note balance until all class A notes are paid in full; then accrued class B note interestto the class B noteholders; then principal to the class B noteholders until the notes are paid in full; thenaccrued class C note interest to the class C noteholders; then principal to the class C noteholders until thenotes are paid in full; then accrued class D note interest to the class D noteholders; then principal to theclass D noteholders until the notes are paid in full; then principal to the class E noteholders until the notesare paid in full .

5 If an acceleration of the notes has occurred after or as a result of the event of default detailed in the thirdor fourth bullets in the Events Of Default section above, pay in the following priority: accrued class B noteinterest to the class B noteholders; then accrued class C note interest to the class C noteholders; thenaccrued class D note interest to the class D noteholders; then principal to the class A-1 noteholders untilthe notes are paid in full; then principal to the class A-2 and A-3 noteholders, pro rata, based on eachclass' note balance until all of the class A notes are paid in full; then principal to the class B noteholdersuntil the notes are paid in full; then principal to the class C noteholders until the notes are paid in full; thenprincipal to the class D noteholders until the notes are paid in full; then principal to the class E noteholdersuntil the notes are paid in full.

6 Any remaining funds will be deposited into the certificate distribution account for distribution to, or at thedirection of, the residual interestholder.

Portfolio Performance

SC's managed portfolio performance showed slightly worse delinquency and net loss ratesthrough June 30, 2019. Delinquencies for 31 days or more increased to 14.50% from 13.80% overthe same period in 2018. Annualized losses as of June 30, 2019, were 8.43% versus 7.86% for theyear before. Per SC, the uptick in losses is attributable to changes made to their servicing policiesin late 2018, in which SC began performing fewer modifications. As a result, a negative impact togross charge-offs occurs up front since this accelerates the loans that would have been chargedoff after the modification period. This affects the shape of the vintage loss curve to realize higherlosses on the front end. SC expects that total losses will normalize over the life of the vintage.

We view the SDART 2019-3 pool as having a better collateral mix than SC's portfolio, given thatSC's deep subprime auto loans are included in the managed portfolio statistics but largelyexcluded from the SDART pools because they are separately securitized in the company's DRIVEplatform.

Table 3

Managed Portfolio

As of June 30 As of Dec. 31

2019 2018 2018 2017 2016 2015 2014

Principal amount outstanding at end ofperiod (mil. $)

26,313 25,457 26,004 23,971 25,247 26,498 22,862

Delinquencies (%)

31-60 days 9.38 9.27 10.95 10.92 10.84 10.00 10.56

61-90 days 3.66 3.33 4.43 4.55 4.32 3.83 3.72



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Table 3

Managed Portfolio (cont.)

As of June 30 As of Dec. 31

2019 2018 2018 2017 2016 2015 2014

90-plus days and bankrupt accounts 1.46 1.20 1.94 1.78 1.71 1.58 1.50

Total 31-plus-day delinquencies as a% of the principal amountoutstanding(i)

14.50 13.80 17.31 17.25 16.87 15.41 15.77

Net loss experience

Average principal amountoutstanding during the period (mil. $)

26,152 24,564 25,261 24,894 26,045 25,459 22,499

Annualized net losses as a % of theaverage principal outstanding

8.43 7.86 9.32 9.70 9.43 7.75 7.39

(i)The servicer considers a receivable delinquent when an obligor fails to pay the required minimum portion of the scheduled payment by thedue date, as determined per SC's customary servicing practices. In July 2019, SC made certain changes to its treatment of partial payments.Under the previous servicing practices, the required minimum payment with respect to receivables originated by SC or acquired by SC from anunaffiliated third-party originator on or after Jan. 1, 2017, and all receivables originated by SC through its Chrysler Capital channel was 90% ofthe scheduled payment, and the required minimum payment with respect to all other receivables originated by SC or acquired by SC from anunaffiliated third-party originator before Jan. 1, 2017, was 50% of the scheduled payment. Under SC's current accounting policy, which was ineffect before the July 2019 changes to SC's servicing practices, a receivable is considered delinquent if an obligor fails to pay at least 90% ofthe scheduled payment, regardless of the origination channel or origination date. For the delinquency data presented in this table, the period ofdelinquency is based on the number of days payments are contractually past due and was determined based on SC's servicing practices relatedto partial payments as in effect at the time the obligor made the scheduled payment. SC--Santander Consumer USA Inc.

Pool Analysis

As of the July 31, 2019, cut-off date, the collateral pool consisted of approximately $1.169 billionin auto loans (see table 4 for a collateral comparison of recent SDART securitizations).

Table 4

Collateral Comparison

SDART2019-3(i)

SDART2019-2(ii)

SDART2019-1(i)

SDART2018-5

SDART2018-4

SDART2018-3

SDART2018-2(ii)

SDART2018-1(ii)

SDART2017-3

SDART2017-2

SDART2017-1

Issuancedate

Aug. 21,2019

May 22,2019

Feb. 20,2019

Oct. 24,2018

Aug. 22,2018

June 27,2018

April 18,2018

Jan. 24,2018

Sept. 20,2017

May 30,2017

Feb. 28,2017

Pool size(bil. $)

1.169 1.166 1.113 1.260 1.137 1.303 1.189 1.329 1.091 1.503 1.224

Avg.originalprincipalbalance($)

21,695 20,339 20,668 19,362 19,514 22,071 N.A. N.A. 19,793 19,790 18,234

Weightedavg. APR(%)

15.48 15.49 15.20 15.52 15.70 15.71 15.80 15.83 15.87 15.76 15.73

Weightedavg.originalterm(mos.)

71 71 71 71 71 71 71 71 71 71 71



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Table 4

Collateral Comparison (cont.)

SDART2019-3(i)

SDART2019-2(ii)

SDART2019-1(i)

SDART2018-5

SDART2018-4

SDART2018-3

SDART2018-2(ii)

SDART2018-1(ii)

SDART2017-3

SDART2017-2

SDART2017-1

Seasoning(mos.)

6 2 4 6 5 5 10 7 5 7 7

Newvehicles(%)

41.41 41.00 48.60 51.90 49.75 55.82 40.91 38.82 39.21 38.72 39.37

Usedvehicles(%)

58.59 59.00 51.40 48.10 50.25 44.18 59.09 61.18 60.79 61.28 60.63

Weightedavg. LTV(%)

107.75 106.66 106.90 107.33 106.72 103.67 106.50 106.05 105.30 107.14 109.15

Weightedavg.originalFICOscore(iii)

619 600 615 617 623 609 610 613 608 614 609

No score(%)

12.16 10.77 9.96 9.80 11.11 10.35 12.54 10.51 10.24 12.22 10.68

500 andlower (%)

2.60 2.81 2.27 3.17 2.68 6.13 3.11 3.90 3.72 4.14 2.77

501-600(%)

35.41 42.30 36.83 36.48 34.07 40.23 40.40 39.38 42.01 37.30 38.57

601 andhigher (%)

49.83 44.11 50.94 50.55 52.15 43.29 43.95 46.21 44.00 46.34 47.98

Weightedavg.LFS(iv) –existingmodel

550 550 551 550 553 553 555 553 552 555 552

450 andlower

4.36 0.03 1.56 1.89 1.07 1.94 0.91 1.87 0.00 2.03 1.21

451-550 54.53 58.33 54.55 54.46 58.69 57.36 57.94 56.92 59.83 54.50 58.69

551-650 30.46 35.98 35.71 34.86 29.88 29.47 31.34 30.70 31.68 32.53 33.28

651 andhigher

10.66 5.66 8.17 8.79 10.36 11.23 9.82 10.51 8.49 10.94 6.82

Weightedavg.LFS(iv) –newmodel

538 531 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.

450 andlower

11.01 9.08 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.

451-550 50.77 55.51 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.

551-650 29.40 31.77 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.

651 andhigher

8.82 3.64 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.



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Table 4


SDART2019-3(i)

SDART2019-2(ii)

SDART2019-1(i)

SDART2018-5

SDART2018-4

SDART2018-3

SDART2018-2(ii)

SDART2018-1(ii)

SDART2017-3

SDART2017-2

SDART2017-1

Total % ofloans withan originalterm of61-72mos.

75.88 76.92 76.34 72.94 78.30 78.18 80.75 80.74 81.90 85.02 80.00

Total % ofloans withan originalterm for73-75mos.

16.18 16.47 17.36 20.38 15.13 15.04 12.45 10.34 10.31 7.66 12.27

Weightedavg.originalFICOscore for73-75mos.(iii)

634 N.A. 620 641 667 600 N.A. N.A. 590 602 605

Weightedavg.internalcreditscore for73-75mos.(iv)

580 N.A. 568 593 620 581 N.A. N.A. 554 553 552

Weightedavg. LTVfor 73-75mos.

100.73 N.A. 99.41 102.87 101.76 96.96 N.A. N.A. 93.56 97.22 101.59

Top five state concentrations (%)

TX=13.19 TX=16.39 TX=18.34 TX=17.44 TX=17.43 TX=16.41 TX=16.30 TX=17.96 FL=10.19 TX=13.99 TX=17.01

FL=10.16 FL=10.12 FL=11.55 FL=10.08 FL=10.91 FL=10.26 FL=11.70 FL=12.20 TX=9.96 FL=10.42 FL=13.39

CA=8.88 CA=7.41 CA=9.61 CA=8.91 CA=9.01 CA=8.98 CA=8.95 CA=8.58 CA=7.69 CA=8.01 CA=8.70

GA=5.56 PA=6.87 GA=5.76 GA=5.71 GA=5.25 GA=5.46 GA=4.98 GA=5.74 PA=6.37 GA=6.49 GA=5.99

NY=4.12 GA=5.04 IL=4.34 IL=4.16 IL=4.04 IL=4.05 NY=4.02 NY=4.04 GA=5.89 PA=5.23 NY=4.32

S&PGlobalRatings'originalexpectedlifetimeCNL (%)

15.50-16.25 N/A 15.75-16.50 15.75-16.50 15.75-16.50 15.75-16.50 N/A N/A 15.75-16.50 15.75-16.50 15.50-16.25



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Table 4


SDART2019-3(i)

SDART2019-2(ii)

SDART2019-1(i)

SDART2018-5

SDART2018-4

SDART2018-3

SDART2018-2(ii)

SDART2018-1(ii)

SDART2017-3

SDART2017-2

SDART2017-1

S&PGlobalRatings'revisedexpectedlifetimeCNL (%)

N/A N/A N/A N/A N/A N/A N/A N/A 15.00-16.00 15.00-15.75 15.00-15.75

(i)SDART 2019-3 data is as of the July 31, 2019, cut-off date. (ii)S&P Global Ratings did not rate the SDART 2018-1, 2018-2 and 2019-2 transactions. (iii)Excludes receivables of obligorswith no FICO scores. (iv)SC uses a proprietary internal loss forecast score to underwrite and originate collateral. The internal score incorporates, among other factors, deal structurevariables, such as cash down payment, LTV, payment-to-income, and debt-to-income ratios. The score ranges from 1 to 999, with a score of one indicating a greater likelihood of loss anda score of 999 indicating lower likelihood of loss. SC is currently in the process of recalibrating their loss forecasting scoring model. The new scoring model will be phased in over asix-month period, during which all loans originated will be scored using both the current and new models. SDART--Santander Drive Auto Receivables Trust. SC--Santander ConsumerUSA Inc. APR--Annual percentage rate. LFS—Loss forecast score. CNL--Cumulative net loss. LTV--Loan-to-value. N.A.--Not available. N/A--Not Applicable.

Surveillance Update

We currently have outstanding ratings on 10 SDART transactions issued between 2015 and 2019.In September 2018, we reviewed some of these transactions, which resulted in downwardrevisions of our expected CNLs for most of the transactions (see table 5 for our most recentrevised expected CNLs).

SC's post-2016 transactions include repossession expenses. As such, we can expect the 2016 andsubsequent transactions to have slightly lower net recovery rates and slightly higher CNLs, all elseequal. While S&P Global Ratings did not rate the 2016 SDART transactions, company-provideddata for these transactions demonstrate that they are incurring nearly stable gross defaultscompared with the 2015 vintage, but they are experiencing slightly higher CNLs due to lowerrecovery rates (see charts 2, 3, and 4). SC's CNLs (see table 5) are net of SC's repurchase activityfor receivables that didn't make their first two payments.

Table 5

Collateral Performance As Of July 2019 Distribution Date

Series Month

Poolfactor

(%)CurrentCNL (%)

Initial expectedlifetime CNL (%)

Revised expectedlifetime CNL (%) as of

June 2018

Revised expected lifetimeCNL (%) as of September

2018

2015-1 53 10.57 11.53 15.25-16.00 12.25-12.75 12.25-12.75

2015-2 51 12.10 11.76 15.25-16.00 12.50-13.00 12.50-13.00

2015-5 45 15.79 11.22 15.50-16.25 12.75-13.75 12.75-13.75

2017-1 29 32.40 8.70 15.50-16.25 15.00-15.75 15.00-15.75

2017-2 26 35.64 8.02 15.75-16.50 N/A 15.00-15.75

2017-3 22 44.68 6.54 15.75-16.50 N/A 15.00-16.00

2018-3 13 62.54 4.16 15.75-16.50 N/A N/A

2018-4 11 67.66 2.81 15.75-16.50 N/A N/A

2018-5 9 73.73 2.10 15.75-16.50 N/A N/A



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Table 5

Collateral Performance As Of July 2019 Distribution Date (cont.)

Series Month

Poolfactor

(%)CurrentCNL (%)

Initial expectedlifetime CNL (%)

Revised expectedlifetime CNL (%) as of

June 2018

Revised expected lifetimeCNL (%) as of September

2018

2019-1 5 87.51 0.26 15.75-16.50 N/A N/A

CNL--Cumulative net loss. N/A--Not applicable.

Each transaction has credit enhancement in the form of a reserve account, overcollateralization,and excess spread. In addition, all transactions were structured with subordination for themore-senior classes. For all outstanding classes, the credit support levels have grown as apercentage of the declining collateral balances. In addition, the overcollateralization for each ofthese series (except series 2018-4 and 2018-5) can step up to a higher target overcollateralizationlevel if certain CNL metrics are breached. In our view, all of the classes have adequate creditenhancement at their current rating levels. We will continue to monitor the performance of eachoutstanding transaction and take rating actions as we deem appropriate.

Chart 2

Chart 2 shows that the 2015 vintage securitizations are generally trending in line with the 2013and 2014 transactions on a CNL basis. Chart 3 shows that the 2015 vintage is performingprogressively better than the 2013 and 2014 vintages in terms of overall charge-offs. In terms ofcumulative recoveries the 2015 vintage is performing in line with 2014 vintage and slightly lowerthan 2013 vintage (see chart 4). The 2016 and 2017 transactions, while early, are reporting lowerrecovery rates. Weaker recoveries in recent vintages are a trend we have seen across most autosecuritizations and are not necessarily unique to SDART transactions. We will continue to monitorthis trend.



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Chart 3

Chart 4

S&P Global Ratings' Expected Loss: 15.50%-16.25%

We examined static pool data from SC broken out by internal custom score bands. The customscore is based on obligor credit history and loan structure. We used the loss curves from thepaid-off 2007, 2008, and 2009 vintages as well as an aggregate 2007-2012 loss curve to project



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losses for the outstanding 2012-2018 SC-originated collateral. We then applied the poolcomposition weights to the projected losses by internal score band to determine a weightedaverage loss projection for SC-originated collateral. We also examined origination static pool databroken out by custom score and term. Further, our analysis considered repossession expenses,which SC started to net out from recoveries beginning with its 2016 securitizations, and wereviewed the company's repurchase activity on prior transactions.

Based on the above analysis, the recent securitization performance, and a forward-looking view ofthe economy, we expect the SDART 2019-3 transaction to experience CNLs in the 15.50%-16.25%range.

Cash Flow Modeling: Break-Even Cash Flows

Cash flow modeling tests the availability and timing of excess spread. Excess spread, which canbe a critical component of a transaction's overall credit enhancement, can be affected by manyfactors, such as the absolute level and timing of defaults, prepayment speeds, payment timinglags, and the collateral terms.

We modeled the transaction to simulate stress scenarios appropriate for the assigned preliminaryratings (see table 6). Because the final size of the class A-2-A and A-2-B notes won't be knownuntil the pricing date, we modeled scenarios that considered both all of class A-2 being issued asfixed-rate securities and class A-2 being evenly split between fixed- and floating-rate notes withthe maximum amount of floating-rate issuance considered under the offering memorandum.There were no appreciable differences between the two scenarios' cash flow results.

Table 6

Cash Flow Assumptions And Results

Class

A B C D

Front-loaded loss curve

Scenario (preliminary rating) AAA (sf) AA (sf) A- (sf) BBB- (sf)

Loss timing input by monthsoutstanding (12/24/36/48) (%)

30/40/20/10 30/40/20/10 30/40/20/10 30/40/20/10

Voluntary ABS (%) 1.0 1.0 1.0 1.0

Recoveries (%) 40 40 40 40

Recovery lag (mos.) 4 4 4 4

Servicing fee (%) 3.0 3.0 3.0 3.0

Approximate break-even gross losslevels (100% credit to excessspread) (%)(i)

89.78 77.49 58.58 45.80

Approximate break-even net losslevels (100% credit to excessspread) (%)(i)

53.87 46.49 35.15 27.48

Back-loaded loss curve

Scenario (preliminary rating) AAA (sf) AA (sf) A- (sf) BBB- (sf)

Loss timing input by monthsoutstanding (12/24/36/48) (%)

25/30/20/15/10 25/30/20/15/10 25/30/20/15/10 25/30/20/15/10

Voluntary ABS (%) 1.0 1.0 1.0 1.0



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Table 6

Cash Flow Assumptions And Results (cont.)

Class

A B C D

Recoveries (%) 40 40 40 40

Recovery lag (mos.) 4 4 4 4

Servicing fee (%) 3.0 3.0 3.0 3.0

Approximate break-even gross losslevels (100% credit to excessspread) (%) (i)

89.87 77.60 59.97 47.13

Approximate break-even net losslevels (100% credit to excessspread) (%)(i)

53.92 46.56 35.98 28.28

(i)The maximum cumulative gross and net losses on the pool that the transaction can withstand without a payment default on the relevantclasses of notes. ABS--Absolute prepayment speed.

Using an expected net loss of 15.50%-16.25% of the initial pool and applying thetransaction-appropriate stresses in our internal cash flow runs, the break-even results show thatthe class A through D notes are enhanced to the degree necessary to withstand stressed net losslevels that are consistent with the assigned preliminary ratings.

Sensitivity Analysis

Besides analyzing break-even cash flows, we conducted a sensitivity analysis to see whetherunder a moderate ('BBB') stress scenario, all else being equal, our preliminary ratings wouldremain within the tolerances allowed by our ratings stability criteria. We found that our ratings onthe class A and B notes ('AAA (sf)' and 'AA (sf)', respectively) will remain within one rating category,and our ratings on the class C and D notes ('A- (sf)' and 'BBB- (sf)', respectively) will remain withintwo rating categories of our preliminary ratings while they are outstanding.

These rating movements are within the tolerances specified by our credit stability criteria (see"Methodology: Credit Stability Criteria," published May 3, 2010). These criteria indicate that wewould not assign 'AAA' and 'AA' ratings if, under moderate stress conditions, the ratings would belowered by more than one category within the first year and by more than three categories over athree-year period. The criteria also specify that we would not assign 'A' and 'BBB' ratings if suchratings would fall by more than two categories in one year or three categories over three years (seetable 7).

Table 7

Sensitivity Analysis Summary: Moderate 'BBB' Stress (1.70x Base Case)

Fast loss curve Slow loss curve

Cumulative net loss level (16.25% x 1.70) (%) 27.20 27.20

Loss timing input by months outstanding(12/24/36/48/60) (%)

30/40/20/10 25/30/20/15/10

Voluntary ABS (%) 1.00 1.00

Recoveries (%) 40 40

Recovery lag (mos.) 4 4



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Table 7

Sensitivity Analysis Summary: Moderate 'BBB' Stress (1.70x Base Case) (cont.)

Fast loss curve Slow loss curve

Servicing fee (%) 3.00 3.00

Potential rating decline

Class A ('AAA (sf)') One rating category One rating category

Class B ('AA (sf)') One rating category One rating category

Class C ('A- (sf)') Two rating categories Two rating categories

Class D ('BBB- (sf)') Two rating categories Two rating categories

ABS--Absolute prepayment speed.

Chart 5



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Chart 6

Money Market Tranche Sizing

The proposed money market tranche's (class A-1's) legal final maturity date is Aug. 17, 2020. Totest whether the money market tranche can be repaid by its maturity date, we ran cash flowsusing assumptions to delay the principal collections. We assumed zero defaults and a 0.25%absolute prepayment speed for our cash flow run, and we confirmed that the tranche would payoff within 11 months.

Legal Final Maturity

To test the legal final maturity dates set for the long-dated tranches, we determined the datewhen the respective notes would fully amortize in a zero-loss and zero-prepayment scenario andthen added three months to the result for classes A-2 through D. For the longest-dated security(class E), 12 months is added to the tenor of the longest receivable in the pool to accommodateextensions on the receivables. Furthermore, in the break-even scenario for each rating level, weconfirmed that credit enhancement was sufficient to both cover losses and repay the relatednotes in full by the legal final maturity date.

Santander Consumer USA Inc.

Background/ownership

SC was established as an independent auto finance company named Drive Financial Services inAugust 2000. Before being acquired by Banco Santander S.A. in December 2006, Drive FinancialServices was owned by BoS (USA) Drive Inc., a wholly owned subsidiary of HBOS Group PLC, and



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Drive Financial Services' management. Banco Santander S.A. completed its acquisition of DriveFinancial Services in December 2006, resulting in a 91.5% ownership of the company.

SC has been a part of SHUSA since 2009, when Banco Santander S.A. contributed the business toSHUSA. In December 2011, Banco Santander issued stock privately to investors, lowering BancoSantander's ownership to 65.0%. Then, in January 2014, investors and Banco Santander sold aportion of SC stock in an IPO. Following the IPO, Banco Santander sold down its ownership to59.0% of SC. In November 2017, Banco Santander increased its ownership in SC to 68.1% byacquiring the approximate 9.6% stake owned by SC's former CEO who resigned in July 2015.

In our corporate analysis, and in line with the accounting treatment, we have continually viewedSC as if it were wholly owned by SHUSA because we believe SHUSA bears the risk of thissubsidiary and is ultimately responsible for its support. SHUSA is Banco Santander S.A.'s U.S.intermediate bank holding company. Its main U.S. bank subsidiary is Santander Bank N.A.(A-/Stable/A-2). Our ratings on SHUSA and Santander Bank are based primarily on our view thatthey are highly strategic subsidiaries of Spain-based Banco Santander S.A. (A/Stable/A-1). Ourrating on SHUSA is one notch below that of Santander Bank, reflecting that SHUSA creditors aremore likely to be structurally subordinated to Santander Bank creditors (see "Santander HoldingsUSA Inc. Downgraded To 'BBB' Reflecting Increased Risk Of Structural Subordination; Outlook IsStable,") published Dec. 4, 2017).

Originations

SC, based in Dallas, originates and services auto loans and leases through a network of more than15,000 dealers nationwide. Since February 2013, it has also served as Chrysler Group LLC'spreferred lender by originating auto loans across the full credit spectrum. In 2018, SC originatedapproximately $28.8 billion in auto-related receivables, comprising 33% core subprime autoloans, 33% Chrysler Capital retail auto loans, and 34% Chrysler Capital auto leases. Thereceivables in this SDART pool are primarily from its core subprime line of business.

Management changes

SC recently announced some forthcoming changes in management. In September, Fahmi Karam,head of pricing and analytics for SC, will also become the chief financial officer. He will take overfor Juan Carlos Alvarez, who will become the CFO of Santander US and Santander Bank NorthAmerica. Mr. Alvarez has been SC's CFO since 2017 and was SHUSA's corporate treasurer prior tothat appointment. Mr. Alvarez succeeds Duke Dayal in his capacity as Santander US CFO.

Additionally, Shawn Allgood, currently the executive vice president at Chrysler Capital, succeedsRichard Morrin as the head of Chrysler Capital and Auto Relationships. This appointment becameeffective in July.

Underwriting

The company uses a highly automated credit approval process built on its proprietary risk scoringmodels. These models are often refined, as was the case during the fourth quarter of 2017, whenloan origination volume with an LFS of less than 640 declined by $486 million in fourth-quarter2016. SC's overall underwriting policy for its auto finance portfolio is based on a tiered, risk-basedsystem. SC's credit risk management policy outlines global limits for various credit factors,including maximum PTI, maximum DTI, maximum LTV, maximum loan term, maximum vehicle age,maximum vehicle mileage, and maximum loan amount. Any loan application that exceeds one of



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the global limits is considered an exception to the company's underwriting guidelines and requiresadditional levels of review before approval. In addition to these global limits, the companyconsiders various other credit factors in its underwriting, including custom score, FICO score, anddepth of the borrower's credit history.

Servicing/collections

Similar to other auto finance companies, SC divides its collection process into stages based onlevels of delinquency (early-stage, late-stage, and potential loss). The number of days a receivableis delinquent enough to trigger any stage in the collection process varies depending on thebehavioral and credit quality of the related obligor. SC's servicing policies allow for paymentmodifications for obligors who have encountered temporary financial difficulty. The policy doesnot allow for the possibility of an extension until at least six months after the account wasoriginated. Receivables are placed in "nonaccrual" status when they are greater than 60 daysdelinquent. In general, receivables are charged off when they become contractually delinquentgreater than four months. SC continues to pursue deficiencies on charged off receivables until itdetermines that no further recoveries can be collected.

Related Criteria

- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation AndSpecial-Purpose Entity Criteria, May 15, 2019

- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating StructuredFinance Securities: Methodology And Assumptions, Jan. 30, 2019

- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017

- Criteria | Structured Finance | General: Methodology: Criteria For Global Structured FinanceTransactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon ANonmonetary EOD, March 2, 2015

- Criteria - Structured Finance - General: Criteria Methodology Applied To Fees, Expenses, AndIndemnifications, July 12, 2012

- General Criteria: Global Investment Criteria For Temporary Investments In TransactionAccounts, May 31, 2012

- Criteria | Structured Finance | RMBS: U.S. Interest Rate Assumptions Revised For May 2012 AndThereafter, April 30, 2012

- Criteria | Structured Finance | ABS: General Methodology And Assumptions For Rating U.S. AutoLoan Securitizations, Jan. 11, 2011

- Criteria - Structured Finance - General: Standard & Poor's Revises Criteria Methodology ForServicer Risk Assessment, May 28, 2009

Related Research

- Request For Comment: Methodology To Derive Stressed Interest Rates In Structured Finance,April 16, 2019

- Santander Holdings U.S.A Inc., Aug. 10, 2018



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- Santander Holdings USA Inc. Downgraded To 'BBB' Reflecting Increased Risk Of StructuralSubordination; Outlook Is Stable, Dec. 4, 2017

- How Worsening Auto Finance Conditions Could Affect Banks, Nonbank Finance Companies, AndCaptive Finance Companies, May 8, 2017

- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top FiveMacroeconomic Factors, Dec. 16, 2016

In addition to the criteria specific to this type of security (listed above), the following criteriaarticles, which are generally applicable to all ratings, may have affected this rating action:"Counterparty Risk Framework: Methodology And Assumptions," March 8, 2019; "Post-DefaultRatings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23,2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions,"Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D'And 'SD' Ratings," Oct. 24, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings,"Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch AndOutlooks," Sept. 14, 2009.

The author would like to thank Ishan Shankar for his contributions to this presale report.



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