Bonds backed by auto loans make up the biggest chunk of asset-backed deals issued so far this year.

This helps consumers shopping for cars as they can get loans at lower rates because banks can offer them more attractive deals. Having lower monthly payments also means borrowers are less likely to default on their loans as they juggle bills in a sour economy, with the constant fear of a job loss.

Issuance of asset-backed securities stood at $77 billion on July 24, down from $126 billion at this time last year, according to Asset-Backed Alert, a trade publication. Of this, nearly 40% of issuance - worth about $28 billion - is in the auto sector, up from about 29% at this time last year, according to Citigroup analysts. Credit-card-loan-backed deals have fallen to second place this year, comprising about a third of issuance, down from 46% at this time last year.

The heavy issuance of auto deals reflects the "backlog of auto deals left over from late 2008," said Darrell Wheeler, head of securitization research at Citigroup.

A substantial portion of the deals that were sold this year were eligible for cheap funding for investors through the Federal Reserve's Term Asset-Backed Securities Loan Facility, or TALF. Issuers this year include Ford Motor Co. (F), Honda Motor Co. (HMC), Nissan Motor Co. (NSANY), Volkswagen AG (VLKAY) and Chrysler Group LLC.

By offering these cheap loans, the central bank has given a boost to the securitization market and helped ease the credit situation in the economy.

"If a consumer cannot get a competitive loan to buy a car, there isn't much of a point in saving the car manufacturers," said Jim Harrington, an asset-backed securities portfolio manager at Ryan Labs Asset Management in New York. "There was a break in the chain."

Auto-sector loans represent about 20% of all consumer-asset-backed securities issuance in a typical year. The deals represent a relatively safe investment: From 1986 through the first quarter of 2009, auto ABS accounted for roughly 20% of all the upgrades and only 1.1% of the downgrades, according to a note from Citi.

"A vehicle ranks highly in the consumer's hierarchy of needs; therefore the loan purpose is also a positive attribute," the Citi note said, because consumers "will prioritize paying their monthly vehicle loan payment, even in hard times."

-By Anusha Shrivastava, Dow Jones Newswires; 212-416-2227; anusha.shrivastava@dowjones.com