U.S. banks are taking bigger risks in auto lending as they compete for market share in a sector that remains red-hot. And analysts at Moody's Investors Service are predicting that the road ahead looks bumpy, with banks poised to recover less of their money when cars get repossessed than some of their competitors will.

Between 2010 and 2014, banks reported relatively low delinquency rates on car loans to so-called prime borrowers, according to a new report from the credit rating agency. But over time those rates have risen, and are now comparable with the late-payment rates at the financing arms of auto manufacturers.

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