Exeter Select Automobile Receivables Trust 2025-3 Annual Report

I’m here to help you break down the annual report for the Exeter Select Automobile Receivables Trust 2025-3.

Remember, this isn’t a typical company like Apple or Coca-Cola. It is a financial "bucket" filled with car loans. Investors buy pieces of this bucket to collect interest as people pay off their loans.

1. What does this trust do?

Exeter Finance LLC created this trust in October 2025 to hold a pool of car loans. The trust issued $1 billion in notes to investors. Its only job is to collect payments from borrowers and pass that cash to investors. It has no employees or corporate strategy; it simply follows a strict set of legal rules.

2. Financial performance

The trust is in its early stages. It currently collects payments from about 45,000 individual auto loans. As of year-end, the trust successfully paid all scheduled interest and principal to investors. The trust’s "profit" is the gap between the interest earned from car loans (about 18.5%) and the interest paid to investors (about 6.2%), minus fees and losses.

3. Major wins and oversight

The trust passed its first round of audits for 2025. Exeter Finance (the servicer) and Citibank (the trustee) confirmed they followed all legal agreements. Independent accountants verified that the cash collection process works correctly. These audits confirm that the payment system—which pays senior investors before junior ones—is working as designed.

4. Financial health and structure

The trust uses several tools to protect investors from loan defaults:

• Asset Reviewer: If losses exceed 12.5% of the initial pool, Clayton Fixed Income Services will review the loans. If any loans don't meet original standards, Exeter Finance must buy them back.
• Diversification: The pool is spread across many borrowers. No single borrower makes up more than 0.05% of the total, which lowers the risk of any one person defaulting.
• Credit Enhancement: The trust holds a $10 million reserve account and uses "overcollateralization." These act as a buffer to absorb losses before investors lose any principal.

5. Key risks

Because this trust holds subprime car loans, your investment depends on the borrowers' ability to pay.

• Economic Risk: If unemployment rises or used car values fall, the money recovered from repossessed cars could drop. This would increase losses and shrink the reserve account.
• Operational Risk: The trust relies on Exeter Finance to manage the loans. If Exeter Finance runs into financial trouble, switching to a new manager could disrupt payments or increase costs.
• Prepayment Risk: If interest rates drop, borrowers might refinance their loans elsewhere. This would pay off your investment faster than expected, forcing you to reinvest your money at lower rates.

6. Future outlook

The trust is in "steady state" mode. It will simply collect payments and pay investors until the remaining loans drop to 10% of the original balance. At that point, the servicer can buy the remaining loans and close the trust. We expect the trust to reach full maturity by late 2029.

Final thought for your decision: When considering this investment, focus on whether you are comfortable with the performance of subprime auto loans in the current economy. Since this is a "pass-through" investment, your returns are tied directly to the borrowers' ability to make their monthly payments. If you prefer a predictable, steady income stream and are comfortable with the risks inherent in subprime lending, this structure offers a clear, rules-based path for repayment.