Subprime borrowers have offered the yield sign to investors in recent years. Lately, though, that sign is looking more like stop.
Delinquencies of at least 60 days for subprime auto loans are up 13 percent month over month for July, according to Fitch Ratings, and 17 percent higher from the same period a year ago. Further, subprime asset-backed securities' annualized net losses are on the rise, which could spook the buyers of auto loans.
Even prime delinquencies are on the rise — Fitch Ratings' survey said that last month's prime auto loans were 21 percent more delinquent than in July 2015.
Some on Wall Street have already warned of a potential crash on auto loans. This year, the total amount of auto loans topped the $1 trillion mark, as borrowers took on debt that takes longer to repay.
"Increased losses are emanating from weaker collateral pools in the 2013-2015 transactions, which have weaker credit quality including lower FICO scores, higher amounts of extended term loans (over 60 months) and higher LTVs [loan to value ratios]," Fitch Ratings analysts wrote Thursday.
Still, there are factors potentially supporting the auto market. The Fitch Ratings report points out that used vehicle values are defying expectations and remaining healthy this year. Further, U.S. unemployment rates remain low nationwide, a key signal for the borrowing economy.