Lenders and finance companies have dramatically pulled back the number of loans they issue to borrowers with the poorest credit records.
A new report by Experian shows the number of loans written in the first quarter for borrowers with subprime and deep subprime credit ratings fell to a 10-year low. Collectively, auto-loan originations in those two categories dropped 8.6 percent in the first quarter.
"It does appear the industry is policing itself a little bit more," said Melinda Zabritski, Experian senior director of financial solutions. "We started to see delinquencies go up, and lenders really seemed to respond especially in Q1 of this year by tightening up a little bit."
The pullback in loans to those with credit scores under 600 echoes reports from auto dealers about lenders tightening credit standards.
In its monthly dealer survey, UBS found almost a third of the dealers questioned reported tighter credit standards, the highest level measured in the survey since 2009.
Despite the slowdown in new loans to subprime and deep subprime borrowers, those with the poorest credit ratings still owe more than $213 billion on the vehicles they're driving, just under 20 percent of the $1.08 trillion owed on open auto loans.
Last week, Federal Reserve Governor Lael Brainard warned about the potential for more subprime auto loan defaults.
"Underwriting appears to be quite lax last year in subprime auto lending," said Brainard. "Delinquencies rates suggest some borrowers are struggling to keep up with payments."
The latest data from Experian supports Brainard's point. In the first quarter, the 60-day delinquency rate jumped almost 10 percent, according to Experian. By comparison, the 30-day delinquency rate fell 6 percent.
Still, with fewer than 1 percent of all auto loans being two months delinquent, Zabritski believes warnings about a subprime bubble suddenly popping are overstated.
"I don't believe we are in a catastrophic state," she said. "Everyone always talks about lenders having short memories and forgetting