Subprime auto securitization has been firing on all cylinders lately: The strong financial condition of borrowers, good loan underwriting and a solid market for used cars have all kept investor losses on the 2009, 2010 and 2011 vintages to a minimum.

But it is only a matter of time before the market hits some speed bumps. Demand for bonds backed by auto loans, leases and dealer financing is making it ever cheaper for lenders to fund loans. This will inevitably result in a loosening of underwriting practices as new lenders join more established ones competing for borrowers.

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