Santander Drive Auto Receivables Trust 2023-1 Annual Report: A Simple Guide

I’ve put together this guide to help you understand how your investment performed this year. Instead of digging through dense legal filings, I’ve broken down the key details so you can see the big picture.

1. What is this Trust and how did it perform?

Think of this "Trust" as a financial container, not a typical company. Santander Consumer USA (SC) took a $1.26 billion pool of car loans and placed them here. Investors bought different classes of notes (A through D) backed by these loans.

In 2025, the Trust did its primary job: collecting payments from car owners and passing that cash to investors. It remains a stable, behind-the-scenes operation designed to pay off the loans over time.

2. Financial performance

Since this is a securitization trust, it doesn't earn "profit" like a store. Instead, we measure its success by how many borrowers pay on time. As of year-end 2025, the Trust maintained a "cushion" of extra assets to absorb potential losses. Santander, acting as the servicer, confirmed that all monthly payments to investors were made on time.

3. Major wins and challenges

• The Win: The Trust passed its annual audit. Independent accountants verified that the servicer handled all payments correctly, ensuring the cash reached investors as expected.
• The Challenge: A lawsuit was filed against the trustee, Wilmington Trust, regarding unrelated cases. While this Trust isn't a defendant, legal trouble for the trustee could lead to higher administrative costs or, in a worst-case scenario, the need to replace them.

4. Financial health

The Trust is operating exactly as designed. Cash flows in a specific order: first to the servicer, then to the trustee, and finally to investors. The reserve account remains fully funded at 1% of the initial pool, providing a buffer against borrower defaults.

5. Key risks

• Legal "What-ifs": The legal issues facing Wilmington Trust create administrative uncertainty. While the Trust’s assets are legally separate from the trustee, the Trust relies on the trustee to function smoothly.
• Borrower Behavior: This investment depends on how many borrowers pay their loans. If the economy worsens and more people default, the "cushion" for investors will shrink. If the reserve account runs dry, Class D and C noteholders would be the first to see lower payments.

6. Competitive positioning

This is a standard asset-backed security. It doesn't compete for customers; it competes for your investment by offering a higher interest rate than safer bonds. Because these loans are "sub-prime," you receive a higher yield to make up for the higher risk of default.

7. Strategy changes

There have been no changes. Santander remains the servicer, and the Trust continues its "run-off" strategy. No new loans are added; the pool simply shrinks as borrowers pay down their debt.

8. Future outlook

The Trust is in "maintenance mode." As expected, the remaining loan balance is dropping each month. Management continues to focus on the monthly reports to ensure payments remain on track until the final maturity date.

9. Market trends

The Trust complies with all SEC rules. While regulators are currently watching auto-lending practices closely, this closed pool is unlikely to be directly affected. However, any broad changes to how lenders handle collections could indirectly impact how much cash is recovered from delinquent borrowers.

Investor Takeaway: This trust is currently performing as intended, with a steady stream of payments and a fully funded reserve. When evaluating your position, keep an eye on the monthly performance reports—they are the best way to track if borrower defaults remain within the expected range.