Volkswagen Auto Lease Trust 2020-A

Presale:

November 19, 2020

Preliminary Ratings

Class

Preliminary

rating Type

Interest

rate(i)

Preliminary amount

(mil. $)(ii)

Preliminary amount, if

upsized (mil. $)(ii)

Expected legal

final maturity

date

A-1 A-1+ (sf) Senior Fixed 148.00 198.00 Dec. 20, 2021

A-2 AAA (sf) Senior Fixed 277.00 369.00 April 20, 2023

A-3 AAA (sf) Senior Fixed 267.00 359.00 Jan. 22, 2024

A-4 AAA (sf) Senior Fixed 58.00 74.00 July 21, 2025

Note: This presale report is based on information as of Nov. 19, 2020. The ratings shown are preliminary. Subsequent information may result in

the assignment of final ratings that differ from the preliminary ratings. Accordingly, the preliminary ratings should not be construed as

evidence of final ratings. This report does not constitute a recommendation to buy, hold, or sell securities. (i)The interest rates will be

determined on the pricing date. (ii)The actual size of these tranches will be determined on the pricing date.

Profile

Expected closing date Dec. 3, 2020.

Collateral Prime auto lease receivables.

Originator, servicer, and

administrator

VW Credit Inc., a wholly owned subsidiary of Volkswagen Group of America Inc., which is a

wholly owned subsidiary of Volkswagen AG (BBB+/Negative/A-2).

Issuing trust Volkswagen Auto Lease Trust 2020-A.

Origination Trust VW Credit Leasing Ltd.

Depositor Volkswagen Auto Lease/Loan Underwritten Funding LLC, a Delaware limited liability company

and a wholly owned special-purpose subsidiary of VW Credit Inc.

Indenture trustee Citibank N.A. (A+/Stable/A-1).

Owner trustee Deutsche Bank Trust Co. Delaware (BBB+/Negative/A-2).

Origination trustees U.S. Bank N.A. and Wilmington Trust Co.

Delaware Trustee Wilmington Trust Co.

Lead underwriter Citigroup Global Markets Inc.

Presale:

Volkswagen Auto Lease Trust 2020-A

November 19, 2020

PRIMARY CREDIT ANALYST

Peter W Chang, CFA

New York

+ 1 (212) 438 1505

peter.chang

@spglobal.com

SECONDARY CONTACT

Jennie P Lam

New York

+ 1 (212) 438 2524

jennie.lam

@spglobal.com

RESEARCH CONTRIBUTOR

Radhika Wadhi

CRISIL Global Analytical Center, an

S&P Global Ratings affiliate, Mumbai

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Credit Enhancement Summary(i)

VALT 2020-A VALT 2020-A(upsized) VALT 2019-A

Overcollateralization (%)

Initial 14.00 14.00 15.00

Target(ii) 15.25 15.25 16.25 (15.25)

Reserve account (%)

Initial 0.25 0.25 0.25

Target 0.25 0.25 0.25

Total initial hard credit enhancement (%) 14.25 14.25 15.25

Total target hard credit enhancement

(%)(iii)

15.50 15.50 16.50 (15.50)

Discount rate (%) 6.75 6.75 7.75

Estimated excess spread per year (iv)(%) 5.07 5.07 4.73

Initial aggregate securitization value ($) 872,108,740 1,162,803,597 1,529,411,767

Total securities issued ($) 750,000,000 1,000,000,000 1,300,000,000

(i)All percentages are based on the initial aggregate securitization value. (ii)For series 2019-A, the overcollateralization target decreases to

15.25% from 16.25% after class A-2-B is fully paid (iii)For series 2019-A, total target hard enhancement reduces to 15.50% from 16.50% after

class A-2-B is fully paid. (iv)The estimated annual excess spread reflects pre-pricing coupon guidance for series 2020-A and final coupons for

series 2019-A. VALT—Volkswagen Auto Lease Trust.

Rationale

The preliminary ratings assigned to Volkswagen Auto Lease Trust 2020-A's (VALT 2020-A's)

asset-backed notes series 2020-A, reflect our view of:

- The availability of approximately 21.1% credit enhancement in the form of 14.00%

overcollateralization, which will build to a target of 15.25% of the initial securitization value; a

0.25% nonamortizing reserve account; and excess spread (all percentages are measured in

terms of the pool's initial aggregate securitization value).

- The underlying collateral's credit quality, which consists of primarily prime auto lease

receivables that have a weighted average FICO score of 774 (775 if upsized).

- Our expectation that under a moderate ('BBB') stress scenario, all else being equal, our

preliminary ratings on the class A notes would remain within one rating category. These rating

movements are consistent with the credit stability limits specified by section A.4 of the

appendix contained in "S&P Global Ratings Definitions," published Aug. 7, 2020).

- The diversified mix of vehicle models and vehicle types in the pool.

- The residuals' expected maturities.

- The historical residual retention values of vehicles in the pool.

- The Automotive Lease Guide's (ALG's) forecast for each vehicle's residual value at lease

inception and the current residuals.

- The timely interest and full principal payments by the notes' legal final maturity dates made

under cash flow scenarios that were stressed for credit and residual losses consistent with the

assigned preliminary rating.

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Presale: Volkswagen Auto Lease Trust 2020-A

- The transaction's legal structure.

Our expected credit loss for the VALT 2020-A pool is 0.85% of the securitization value, which

reflects our static pool loss projections for VW Credit Inc.'s lease originations, credit loss

performance on prior VALT securitizations, peer comparisons, and a forward-looking view of the

economy. Our 'AAA' stressed scenario for credit losses is approximately 4.25% of the

securitization value.

Our 'AAA' residual stress for the VALT 2020-A pool is approximately 26.9% of the pool's aggregate

undiscounted base residual value. After applying this stress to the residual value portion of the

pool (62.9%) and the portion of nondefaulting leases (91.5%) under this scenario, our 'AAA'

residual stress constituted approximately 15.5% of the securitization value.

In deriving our residual stress, we compared the VALT 2020-A base residual values by model

series with its historical residual retention values, which the issuer provided. We also considered

the pool's residual maturity profile, the vehicle model concentration, the vehicle segment

concentration, the consistency of the ALG's residual forecasts regarding the Volkswagen and Audi

vehicles' historical retention values, and the ALG's current forecast for the residual values of the

vehicles included in the VALT 2020-A pool, as well as our outlook on both the industry and the

economy. In addition, we gave no explicit credit to any cumulative positive variance in the ALG's

mark-to-market compared with its residual values at inception (see the S&P Global Ratings'

Expected Loss section below for more information).

Overall, our stressed 'AAA' credit and residual loss level is 19.75% of the securitization value. The

credit enhancement outlined above (and in the Cash Flow Modeling section below) provides more

than adequate support for our assigned preliminary ratings.

Changes From The Series 2019-A Transaction

Credit enhancement changes from the VALT 2019-A transaction are as follows:

- The initial overcollateralization (OC) decreased to 14.00% from 15.00%.

- Even though the initial target overcollateralization is lower at 15.25% (from 16.25% for series

2019-A), series 2019-A's ultimate target OC steps down to the same 15.25% after its class

A-2-B is paid off. Series 2019-A's initially higher OC target helps to mitigate for any potential

stress upward movement in the one-month LIBOR benchmark while its A-2-B floating-rate

class is outstanding.

- The securitization discount rate decreased to 6.75% from 7.75%.

- The estimated annual excess spread pre-pricing increased to 5.07% from 4.73% for the 2019-A

series post-pricing (pre-pricing was 4.19%).

Collateral composition changes for both the base and the upsized pools from VALT 2019-A are as

follows:

- The weighted average FICO score increased to 774 (775 upsized) from 769.

- The mix of Volkswagen models decreased to 43% from 46%, and the mix of Audi models

increased to 57% from 54%.

- The percentage of original lease terms of 36 months or less decreased to 33% from 52%.

- The percentage of original lease terms of 37-42 months increased to 50% from 31%.

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Presale: Volkswagen Auto Lease Trust 2020-A

The weighted average seasoning is similar at 13 months, and the percentage of 43-48 months

original lease terms are similar at 17%. Overall, we believe the series 2020-A pool's credit quality

is generally comparable to the series 2019-A pool and we maintained our expected cumulative net

credit loss at 0.85%, reflecting, in our view, the strong credit characteristics of series 2020-A

similar to those of prior VALT transactions.

The base residual value for VALT 2020-A incorporates a recent ALG mark-to-market value. The

base residual value is defined as the lowest of the contract residual set by VW Credit, the ALG's

residual value estimate established at the lease contract's inception, and the ALG's current

residual value estimate as of September/October 2020.

S&P Global Ratings believes there remains a high degree of uncertainty about the evolution of the

coronavirus pandemic. Reports that at least one experimental vaccine is highly effective and

might gain initial approval by the end of the year are promising, but this is merely the first step

toward a return to social and economic normality; equally critical is the widespread availability of

effective immunization, which could come by the middle of next year. We use this assumption in

assessing the economic and credit implications associated with the pandemic (see our research

here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and

estimates accordingly.

Transaction Overview

VALT 2020-A is VW Credit's 13th auto lease transaction since 2002. The series is structured

similarly to prior VW Credit auto lease securitizations, with nonamortizing target credit

enhancement. The pool's structure incorporates a nonamortizing reserve amount equal to 0.25%

of the initial securitization value and an OC amount of 14.00% of the initial securitization value,

which builds to a target OC amount of 15.25% of the initial securitization value and does not

amortize. The series 2020-A pool's estimated excess spread is 5.07% per year.

Legal Structure

The receivables backing the VALT 2020-A notes will comprise monthly lease payments and base

residual values of a pool of lease contracts originated by Volkswagen and Audi dealers and

assigned to the origination trust. All of the leased vehicles included in the transaction will be titled

in the origination trust's name, VW Credit Leasing Ltd.--a Delaware statutory trust created in

1999. The origination trust will issue a special unit of beneficial interest (SUBI) certificate, which

represents a beneficial interest in the origination trust relating solely to the specified auto lease

receivables and the related residual values dedicated to the SUBI's repayment and, ultimately, the

rated notes. The issuing entity will own the rights, title, and interest to the SUBI certificate and

pledge the SUBI certificate to the indenture trustee for the noteholders' benefit.

On the closing date, VW Credit will sell, transfer, and assign the transaction's SUBI certificate to

the depositor, Volkswagen Auto Lease/Loan Underwritten Funding LLC. The depositor will then

transfer and assign the SUBI certificate to VALT 2020-A, the issuer and newly formed Delaware

statutory trust. The issuer will then pledge the SUBI certificate to the indenture trustee as security

for the series 2020-A notes, and issue the rated notes. (See chart 1 for the transaction structure.)

The issuing entity will issue class A-1 through A-4 notes.

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Presale: Volkswagen Auto Lease Trust 2020-A

Chart 1

In rating this transaction, S&P Global Ratings will review the legal matters that it believes are

relevant to its analysis, as outlined in its criteria.

Pension Benefit Guaranty Corp. Risk

The Pension Benefit Guaranty Corp. (PBGC) has the ability to file a lien against any Volkswagen

Group of America Inc.'s (Volkswagen's) controlled group members' assets if the minimum

contribution payments to Volkswagen's defined benefit pension plan are not paid as required by

law, or if Volkswagen terminates an underfunded defined benefit pension plan. As a member of

the controlled group, VW Credit's assets (including those leases and vehicles designated to the

SUBI, which serve as the payment source to the issued notes) could be subject to a PBGC lien to

the extent Volkswagen's minimum contribution payments are not made, or Volkswagen

terminates an underfunded defined benefit plan. In our opinion, the risk of a PBGC lien on the

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Presale: Volkswagen Auto Lease Trust 2020-A

leases and the residuals assigned to the SUBI pledged to the series 2020-A notes is mitigated by

the pension plan's relatively small size compared to the origination trust's assets and the

company's history of keeping the plan funded at the appropriate levels.

Payment Structure

On each payment date before the note acceleration following an event of default, the indenture

trustee will make distributions from available funds according to the payment priority shown in

table 1.

Table 1

Payment Waterfall

Priority Payment

1 Advance reimbursements to the servicer.

2 Pro rata, 1.00% servicing fee and the administration fee.

3 Pro rata, trustee and ARR fees and expenses limited to $275,000 per annum in the aggregate.

4 Pro rata note interest to the noteholders.

5 First-priority principal payment (if the total class A notes' balance is greater than the securitization

value).

6 Fund the reserve account until it is equal to the targeted reserve account balance.

7 The regular principal distribution amount to the noteholders(i).

8 Pro rata, any amounts not previously paid pursuant to the transaction documents to the ARR and

trustees.

9 Any remaining funds to the certificateholder.

(i)The regular principal distribution amount is designed to build the initial overcollateralization to the target overcollateralization amount. All of

the required payments on the notes will be due and payable on each payment date (the 20th of each month), beginning Dec. 21, 2020.

ARR—Asset representations reviewer.

On each payment date after the note acceleration following an event of default, the indenture

trustee will distribute the available funds according to the payment priority shown in table 2.

Table 2

Payment Waterfall

Priority Payment

1 Pro rata, to the indenture trustee, the SUBI trustee, and the owner trustee, any accrued and unpaid fees,

expenses, and indemnity payments.

2 To the asset representations reviewer, any accrued and unpaid fees, expenses, and indemnity payments,

limited to $250,000 per year.

3 To the servicer for reimbursement of all outstanding advances.

4 Pro rata, the servicing fees to the servicer and administration fees to the administrator.

5 Pro rata, to the noteholders to pay due and unpaid interest.

6 Class A-1 principal outstanding.

7 Pro rata principal to class A-2 thru A-4 outstanding.

8 To the asset representations reviewer for any accrued and unpaid fees, expenses, and indemnity payments.

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Presale: Volkswagen Auto Lease Trust 2020-A

Table 2

Payment Waterfall (cont.)

Priority Payment

9 Any remaining amounts to the certificateholder.

SUBI--Special unit of beneficial interest.

VALT 2020-A events of default include: failure to pay note interest; failure to pay note principal on

the respective legal final maturity date; a material and adverse default in the observance or

performance of any covenant, or a breach of the representations or warranties, to the extent

declared an event of default; and the issuing entity's bankruptcy, insolvency, receivership, or

liquidation.

Residual Value

The notes that VALT 2020-A will issue to finance the series 2020-A pool are backed by a pool of

leases and the related leased vehicles, whose aggregate securitization value equals $872,108,740

($1,162,803,597 if upsized). The leases' securitization value is the sum of each lease's remaining

monthly lease payments' present value and the leased vehicle's base residual value (both

discounted at 6.75%). Each leased vehicle's base residual value is equal to the lowest of the

stated residual value set by VW Credit, the ALG's residual value estimate at lease inception, and

the ALG's current residual value estimate as of September/October 2020.

The stated residual value is assigned to the vehicle at the lease's inception (as stated in the lease

contract), which, in turn, determines the monthly payments for the individual lease. The stated

residual value is typically set higher than the ALG's residual value to reduce the lease payments

that the lessee owes under the lease contract (lease subvention). The base residual value provides

a more conservative estimate of the vehicle's future value, which helps mitigate the noteholders'

exposure to losses associated with lease subvention. The VALT 2020-A pool's undiscounted base

residual value is $548,389,789 ($731,412,532 if upsized), or 62.9% of the pool's securitization

value.

Managed Portfolio

For the nine months ended Sept. 30, 2020, VW Credit's total serviced lease portfolio contained

586,742 contracts totaling $17.5 billion. VW Credit's portfolio performance shows that its net

losses (as a percentage of the outstanding lease contracts' average dollar amount) decreased to

0.36% (annualized for the nine months ended Sept. 30, 2020), from 0.52% (annualized a year

earlier). Total delinquencies as a percentage of the number of delinquent lease contracts

outstanding are 0.88% as of Sept. 30, 2020, down from 1.20% year-over-year. Repossessions, as a

percentage of the average number of lease contracts outstanding, decreased year over year, to

0.48% annualized from 0.75% annualized.

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Presale: Volkswagen Auto Lease Trust 2020-A

Table 3

Total Managed Portfolio

For nine months ended

Sept. 30 For the year ended Dec. 31

2020 2019 2019 2018 2017 2016 2015

Lease contracts outstanding (bil. $) 17.483 18.075 18.269 17.570 17.160 16.700 15.130

Avg. dollar amount of leases

outstanding (bil. $)

17.888 17.793 17.895 17.400 16.915 16.087 14.167

No. of contracts outstanding 586,742 625,607 620,912 637,128 631,683 620,002 570,628

30-plus day delinquencies (%)(i) 0.88 1.20 1.34 1.40 1.27 1.66 1.46

Repossessions (%)(ii) 0.48(vi) 0.75(vi) 0.76 0.81 1.08 0.89 0.83

Net losses (%)(iii) 0.36(vi) 0.52(vi) 0.49 0.48 0.49 0.29 0.29

Vehicles returned to VW Credit

(%)(iv)

56.34 57.86 58.76 55.20 52.75 53.40 57.80

Total gain (or loss) on ALG residuals

on vehicles returned to VW Credit

(%)(v)

7.88 (5.67) 0.21 (2.02) (2.35) (3.18) 2.80

(i)As a percentage of the number of contracts outstanding. (ii)As a percentage of the average number of lease contracts outstanding. (iii)As a

percentage of the average dollar amount of leases outstanding. (iv)As a percentage of the number of vehicles scheduled to terminate. (v)As a

percentage of the ALG's residual value of returned vehicles sold by VW Credit. (vi)Annualized. ALG--Automotive Lease Guide. VW Credit--VW

Credit Inc.

In 2019, VW Credit's lease portfolio experienced a residual gain of 0.21%. VW Credit's lease

portfolio had experienced residual losses from 2016 through 2018 and residual gains for 2010

through 2015. Additionally, for the nine months ended Sept. 30, 2020, the portfolio saw gains of

7.88% of the vehicles' ALG forecasted residual value--an improvement year over year from a loss

of 5.67% for the nine months ended Sept. 30, 2019.

Securitization Performance

The 2019-A transaction currently outstanding has incurred 0.21% of cumulative net credit losses

and cumulative residual gains of 0.20% with a pool factor of 77.96% at month 11.

The paid-off securitizations from the VALT 2002-A to 2014-A pools had cumulative net credit

losses ranging from 0.17%-0.62%, as a percentage of the pools' aggregate initial securitization

values (see chart 2).

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Presale: Volkswagen Auto Lease Trust 2020-A

Chart 2

The VALT 2005-A and 2006-A pools experienced cumulative net residual losses of 2.70% and

2.62%, respectively, as a percentage of the pools' aggregate initial securitization values, while

VALT 2009-A, 2010-A, 2011-A, 2012-A, and 2013-A pools experienced cumulative net residual

gains of 1.34%, 1.45%, 0.92%, 0.75%, and 1.23%, respectively. The more recent paid-off

transactions, VALT 2014-A and 2015-A, experienced cumulative net residual losses of 0.25%, and

3.37%, respectively (see chart 3).

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Presale: Volkswagen Auto Lease Trust 2020-A

Chart 3

Collateral Analysis

The VALT 2020-A securitized pool contains 31,313 (41,732 if upsized) prime auto lease receivables

that have a weighted average FICO score of 774 (775 if upsized) (see table 5). The pool comprises a

well-diversified mix of vehicle models. The top five models by securitization value are Tiguan

(19.13%, 19.14% if upsized), Audi Q5 (17.53%, 17.81%), Jetta (10.29%, 10.15%), Atlas (8.95%,

8.93%), and Audi Q7 (8.17%, 8.17%).

The VALT 2020-A pool consists of 33% leases with original terms of 36 months or less, 50% 37-42

months, and 17% 42-48 months. No leases with original terms greater than 48 months are

included in the pool.

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Presale: Volkswagen Auto Lease Trust 2020-A

Table 4

Original Pool Characteristics

VALT

2020-A

VALT 2020-A

(Upsized) VALT 2019-A

VWALT

2015-A(i) VALT 2014-A VALT 2013-A VALT 2012-A VALT 2011-A* VALT 2010-A

No. of leases 31,313 41,732 59,863 69,355 68,943 65,841 64,099 50,109 48,182

Aggregate

securitization

value ($)

872,108,740 1,162,803,597 1,529,411,767 1,710,919,448 1,769,948,826 1,474,969,191 1,474,926,391 1,190,486,760 1,190,480,503

Avg.

securitization

value ($)

27,851 27,864 25,549 24,669 25,673 22,402 23,010 23,758 24,708

New vehicles

(%)

100 100 100 100 100 100 100 100 100

Vehicle make (%)

Volkswagen 43.11 42.99 45.83 45.26 50.65 55.10 58.03 55.36 48.85

Audi 56.89 57.01 54.17 54.74 49.35 44.90 41.97 44.64 51.15

Weighted

avg. original

term (mos.)

39.73 39.71 39.14 39.24 39.23 38.89 38.28 39.13 38.24

Weighted

average

remaining

term (mos.)

26.95 26.95 26.65 28.63 27.51 25.82 27.48 27.52 27.38

Weighted

avg.

seasoning

(mos.)

12.78 12.76 12.49 10.61 11.72 13.07 10.80 11.61 10.85

Original lease term (%)

Less than

or equal to

36 mos.

33.22 33.36 52.29 54.34 50.37 53.96 61.77 53.66 65.20

37-48 mos. 66.78 66.64 47.71 45.66 49.64 46.04 38.17 46.31 34.45

Greater

than 48

mos.

-- -- -- -- -- -- 0.05 0.03 0.35

Weighted

avg. FICO

score

774 775 769 760 759 764 750 752 753

Top five state concentrations (%)

CA=18.77% CA=18.90% CA=21.20 CA=18.76 CA=12.50 CA=19.74 CA=19.52 CA=18.16 CA=19.75

NY=13.42% NY=13.51% FL=12.71 FL=14.10 FL=10.18 NY=13.81 FL=13.63 FL=14.25 NY=14.99

FL=13.25% FL=13.29% NY=12.50 NY=13.10 NY=10.01 FL=11.86 NY=13.60 NY=14.07 FL=13.59

NJ=8.77% NJ=8.64% NJ=8.56 NJ=8.80 NJ=6.20 NJ=8.54 NJ=8.87 NJ=9.06 NJ=9.62

TX=6.45% TX=6.44% TX=5.16 TX=4.79 PA=5.17 TX=4.55 TX=4.49 TX=5.26 TX=3.97

Undiscounted

base residual

value ($)

548,389,789 731,412,532 992,284,336 1,148,071,534 1,179,997,811 1,026,754,815 1,006,540,717 797,991,518 769,817,973

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Presale: Volkswagen Auto Lease Trust 2020-A

Table 4

Original Pool Characteristics (cont.)

VALT

2020-A

VALT 2020-A

(Upsized) VALT 2019-A

VWALT

2015-A(i) VALT 2014-A VALT 2013-A VALT 2012-A VALT 2011-A* VALT 2010-A

Avg. base

residual value

($)

17,513 17,526 16,576 16,554 17,116 15,594 15,703 15,925 15,977

Base residual

as a % of the

aggregate

securitization

value

62.88 62.90 64.88 67.10 66.70 69.60 68.20 67.00 64.70

(i)Not rated by S&P Global Ratings. VALT--Volkswagen Auto Lease Trust.

Collateral Residual Timing

The leases in the VALT 2020-A pool are scheduled to mature as shown in chart 4.

Table 5

VALT 2020-A Lease Maturity Profile By Year(i)

Year Base (%) Upsized (%)

2021 0.95 0.99

2022 47.15 46.79

2023 48.29 48.59

2024 3.61 3.62

(i)Percentage of the aggregate undiscounted base residual value. VALT--Volkswagen Auto Lease Trust.

Leases will mature each month beginning in July 2021 (see chart 4). For eight months (eleven if

upsized), the expected base residual maturity level exceeds our 5.00% benchmark concentration

limit. The highest monthly maturity is 5.49%, which is expected in December 2022 (5.48% in

September 2022 for the upsized pool). Approximately 95.00% of the base residuals are expected

to mature in 2022 and 2023 (see chart 4).

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Presale: Volkswagen Auto Lease Trust 2020-A

Chart 4

S&P Global Ratings' Expected Loss

VALT 2020-A has two principal risk components: credit and residual risks.

Credit risk

To derive the base-case credit loss for the VALT 2020-A transaction, we used static pool credit

loss data (that VW Credit provided) to project losses on its portfolio of lease originations

segmented by lease term, vehicle make, credit tier, and FICO distribution. We then weighted the

projections by the actual concentration of those various segments in the series 2020-A pool. We

also looked at VW Credit's paid-off and outstanding lease securitizations' loss performances. We

considered the series 2020-A pool's collateral credit quality, VW Credit's overall managed portfolio

performance, collateral and performance comparisons with peers, and the current economic

conditions. Based on this information, we expect the VALT 2020-A pool will experience 0.85%

credit loss, which is equal to our initial cumulative net credit loss expectation for the VALT 2019-A

pool.

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Residual risk

In our analysis of the series 2020-A pool's residual risk, we considered the following factors:

- The stability of the Volkswagen and Audi brands' historical used vehicle values;

- The consistency of the ALG's historical forecasts relating to the historical actual used vehicle

values;

- The basis behind the ALG's current forecast;

- The basis for the differences between the actual used vehicle values and the ALG's forecasts;

- The 10 top Volkswagen and Audi vehicle models (Tiguan, Q5, Jetta, Atlas, Q7, A4, A6, Q8, Q3, and

A5), which make up approximately 86% of the series 2020-A pool's total base residual;

- Brand perception; and

- Our macroeconomic outlook.

Based on these factors, we did not adjust the base residual value. We applied the following

haircuts to the base residual value:

Base haircut: According to our auto lease criteria, we first applied an initial 26.0% rating-specific

haircut to the series 2020-A pool's base residual value, which is commensurate with a 'AAA' rating

scenario.

Excess concentration haircut: In addition to the aforementioned base haircut, we applied an

additional haircut to the amount of nondefaulted lease residuals exceeding the concentration

limits applicable to the benchmark pool ("excess concentrations"), as outlined in our auto lease

criteria. The VALT 2020-A pool is diversified in terms of model concentration, vehicle segment

concentration, and lease maturity concentration. The VALT 2020-A pool has a 7.2% excess

concentration in total, resulting in an additional 0.9% base residual value haircut, bringing the

total base residual value haircut applied to the series 2020-A pool to 26.9%.

Speculative-grade manufacturer haircut: We also evaluate the auto manufacturer's

creditworthiness when determining the stress applied to the adjusted base residual value. Our

auto lease criteria apply haircuts to the base residual value of the vehicles produced by

manufacturers with speculative-grade issuer credit ratings (i.e., 'BB+' or lower).

Volkswagen AG manufactures the leased vehicles backing the VALT 2020-A pool. S&P Global

Ratings' issuer credit rating on Volkswagen AG (BBB+/Negative/A-2) reflects the company's

relatively strong business risk profile, business diversity, and relatively modest financial risk

profile. Because of the investment-grade rating, it is not necessary to apply a speculative-grade

manufacturer haircut to the series 2020-A transaction under our current auto lease criteria.

Low diversification haircut: For pools with low diversification, as described in our auto lease

criteria, we apply a low diversification haircut in addition to the aforementioned haircuts. Our auto

lease criteria describe the six conditions for which we would apply this type of haircut if met by the

securitized lease pool. The VALT 2020-A pool does not meet any of these six conditions, so we did

not apply the low diversification haircut.

After analyzing the VALT 2020-A lease pool, applying the relevant residual value haircuts, and

assessing a stressed 100% return rate representing the loss frequency on nondefaulted leased

vehicles (91.50%), our stressed residual loss under a 'AAA' scenario is approximately 15.50% of

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the initial securitization value.

Cash Flow Modeling

We tested VALT 2020-A's proposed structure using cash flow scenarios to determine if the credit

enhancement level was sufficient to pay timely interest and principal in full by the notes' legal

final maturity date under our 'AAA' stress scenarios.

We modeled the transaction to simulate a stress scenario commensurate with the assigned

preliminary ratings. We assumed a 100% turn-in rate on the nondefaulting leases (approximately

91.50%) and no prepayments. The results show that the preliminary rated notes are enhanced to

the degree necessary to withstand stressed credit and residual loss levels that are consistent with

the assigned preliminary ratings. The preliminary 'AAA (sf)' rated notes can withstand a

cumulative net credit loss of approximately 4.25% (or approximately 5.0x our expected loss of

0.85%) and residual losses equal to 15.50% of the initial aggregate securitization value (see table

6).

Table 6

Cash Flow Assumptions And Results(i)

Class A

Scenario (preliminary rating) AAA (sf)

Cumulative net loss percent (%) 4.25

Cumulative net loss timing (mos.) 12/24/36

Cumulative net loss (%) 40/80/100

Voluntary prepayments (%) 0.00

Recoveries (%) 50

Recovery lag (mos.) 4

Residual haircut

Total residual haircut as a % of the undiscounted base residual value 26.9

Vehicle return rate (%) 100.0

Residual realization lag (mos.) 2

Result

S&P Global Ratings' stressed credit and residual loss as a % of the securitization value (%) 19.8

Approximate credit enhancement in the transaction based on S&P Global Ratings' credit stress

and break-even residual stress as a % of the securitization value (%)

21.1

(i)The assumptions and results are for the base, as well as the upsized pool.

Sensitivity Analysis

In addition to running stressed cash flows to analyze the amount of credit and residual losses that

VALT 2020-A can withstand, we ran a sensitivity analysis to determine how the credit and residual

losses could affect the preliminary ratings on the notes in a moderate stress scenario (a 'BBB'

stress). In our view, the preliminary ratings assigned to the class A notes are consistent with the

credit stability limits specified by section A.4 of the appendix contained in "S&P Global Ratings

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Definitions," published Aug. 7, 2020. This indicates that we would not assign a 'AAA' rating if,

under moderate stress conditions, the rating would be lowered by more than one category within

the first year. Under the 'BBB' stress scenario, all else being equal, we would expect our ratings on

the notes to remain within one rating category of the assigned preliminary ratings for the

transaction's life (see chart 5).

Chart 5

Money Market Tranche Sizing

The proposed money market tranche (the class A-1 notes) has a legal final maturity date of Dec.

20, 2021. To test whether the money market tranche can be fully repaid one month prior, we ran

cash flows using assumptions to delay the principal collections during this length of time. In our

cash flow run, we assumed zero defaults and a zero absolute prepayment speed on all leases. We

also stressed the recognition of the monthly lease payments and base residual amounts by

applying a lag of one and two months, respectively. Based on our stressed cash flow runs,

approximately 10 months of collections would be sufficient to pay off the money market tranche.

Legal Final Maturity

To test the legal final maturity dates set for the longer-dated tranches (classes A-2 through A-3),

we determined when the respective notes would be fully amortized in a zero-loss

zero-prepayment scenario, and then added six months to the result. We also looked to see when

these notes would pay off in our stressed cash flow scenarios. In our cash flows for the

longest-dated security (class A-4), we added nine months to the tenor of the last-maturing

receivable in the pool to accommodate extensions and residual realization on the receivables. In

all of our cash flow scenarios, we confirmed that there is sufficient credit enhancement both to

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cover losses and to repay the related notes in full by their legal final maturity dates.

VW Credit Inc. And Volkswagen AG

VW Credit was incorporated in April 1981 and is a wholly owned direct subsidiary of Volkswagen of

America Inc., which is a wholly owned direct subsidiary of Volkswagen AG. VW Credit is Volkswagen

of America Inc.'s financing arm, and its purpose includes purchasing retail installment sales

contracts and leases from Volkswagen and Audi dealers.

In September 2015, Volkswagen AG received a notice of violation from the Environmental

Protection Agency alleging that undisclosed engine management software in certain diesel

engines were installed to circumvent emissions tests in the U.S. Since then, tens of billions in

settlements, fines, and buyback costs have occurred or were agreed to. Although other legal

actions and investigations may be continuing, we considered the current legal and regulatory

developments in our analysis, and we do not to expect them to have an adverse material impact on

this transaction. Mitigating factors are that Volkswagen AG is a leading global automotive

manufacturer with an investment-grade rating.

Related Criteria

- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation And

Special-Purpose Entity Criteria, May 15, 2019

- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And

Assumptions, March 8, 2019

- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured

Finance 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 Finance

Transactions Subject To A Change In Payment Priorities Or Sale Of Collateral Upon A

Nonmonetary EOD, March 2, 2015

- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In

Structured Finance Transactions, Oct. 9, 2014

- Criteria | Structured Finance | General: Criteria Methodology Applied To Fees, Expenses, And

Indemnifications, July 12, 2012

- General Criteria: Global Investment Criteria For Temporary Investments In Transaction

Accounts, May 31, 2012

- Criteria | Structured Finance | ABS: Revised General Methodology And Assumptions For Rating

U.S. ABS Auto Lease Securitizations, Nov. 29, 2011

- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011

- Criteria | Structured Finance | ABS: General Methodology And Assumptions For Rating U.S. Auto

Loan Securitizations, Jan. 11, 2011

- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28,

2009

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Presale: Volkswagen Auto Lease Trust 2020-A

- Criteria | Structured Finance | ABS: Assessing the Risk of Pension Plan Terminations on U.S.

Auto Lease Securitizations, Aug. 17, 2004

Related Research

- Economic Research: U.S. Business Cycle Barometer: Still Signs Of Life, Nov. 2, 2020

- Economic Research: U.S. Real-Time Data: A Cloudy Economic Outlook As COVID-19 Resurges,

Oct. 23, 2020

- U.S. Real-Time Data: The Economic Recovery Decelerates, Oct. 8, 2020

- A Double-Digit Rebound Has Begun, But It's No Time To Celebrate, Oct. 6, 2020

- U.S. Biweekly Economic Roundup: The Coast Is Not Clear For Jobs, Oct. 2, 2020

- The U.S. Economy Reboots, With Obstacles Ahead, Sept. 24, 2020

- COVID-19 Is Testing The Resilience Of Global Structured Finance, May 18, 2020

- The Potential Effects Of COVID-19 On U.S. Auto Loan ABS, March 26, 2020

- How The Wave Of Negative Rating Actions On Global Automakers Has Affected U.S. Auto ABS

Ratings, Feb. 13, 2020

- Presale: Volkswagen Auto Lease Trust 2019-A, Sept. 26, 2019

- Global Structured Finance Scenario And Sensitivity Analysis: Understanding The Effects Of

Macroeconomic Factors On Credit Quality, Dec. 16, 2016

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