Auto lenders are still aggressively pursuing subprime consumers, possibly because of technological advances that have made repossession cheaper and easier.
Large databases can now track the location of license plates with GPS data, allowing lenders to quickly seize vehicles whose owners have missed payments. There also has been growth in the use of in-car devices that some lenders use to locate vehicles and lock ignitions when customers fail to pay. These technologies improve the chances that lenders will recover their collateral, but they also raise privacy concerns among consumer advocates.
"When you have a subprime credit score, you might feel like this is the only option you have," said Chris Kukla, senior counsel for government affairs at the Center for Responsible Lending. "In most cases, it's a take-it-or-leave-it proposition."
It is unclear whether improvements in lenders' ability to recover collateral will compensate for an increase in risky vehicle loans. Subprime auto lending reached at an eight-year high in the first four months of the year, according to Equifax. The company also reported that auto loans to deep-subprime borrowers -- those with credit scores below 550 -- rose 51 percent in the first quarter from a year earlier.