Australian prime car loan securitisation arrears in the second quarter of 2016 produced an annualised net loss rate of 0.62 per cent. This exceeded the previous index high of 0.58 per cent, set 12 months ago in 2Q15. The increase in losses is a reflection of persistently high arrears, and occurred despite apparently favourable economic conditions, according to Fitch Ratings' latest Australian Dinkum ABS Index.At end-June 2016, 30-plus days' arrears were 1.5 per cent, slightly down from 1.55 per cent in 1Q16. An increase in recovery timing could be fuelling the decline in the average recovery rate, which dropped seven percentage points to 35.3 per cent over the quarter.The news also comes at a time when Fitch-rated auto ABS issuance has been strong, with a record quarterly issuance of A$2.95 billion in 2Q16, up from the previous high of $2.9 billion in 4Q13, while vehicles sales remained strong in 1H16, potentially leading to more issuance in the coming quarters."Australia is one of the most competitive new car markets in the world, according to a benchmark study by the Federal Chamber of Automotive," the Fitch Report observed, adding that, "the Australian market is characterised by a high level of choice and affordability; this competitiveness extends to finance options, and is contributing to auto ABS issuance."While unemployment and disposable income drive loan serviceability in the long term, arrears nevertheless have been relatively high over the 1H16, despite the low unemployment rate. On the plus side, other economic fundamentals remain strong, with stable consumer sentiment, low unemployment rates and petrol prices.