NEW YORK -

Moody’s sees finance companies easing off the subprime vehicle loan accelerator, but analysts stopped short of saying that lenders are ready to hit the brakes on originations to consumers with damaged credit histories.

According to a new report from Moody’s, U.S. subprime auto lenders are exercising more caution in granting loans to increasingly risky borrowers, although some data lead Moody's to conclude that a major slowdown in subprime lending is not in the offing.

The report titled, “U.S. Subprime Auto Lenders Somewhat More Cautious,” is based on an analysis of the latest data from Experian.

Moody’s vice president and senior analyst Peter McNally explained that one factor pointing to increasing caution among lenders was improved borrower credit scores for used auto loans in the fourth quarter 2013, the first year-over-year improvement since 2010.

Another factor McNally mentioned is slower growth in the shares of lending in the subprime space held by banks, credit unions, and captive finance companies.

“Declining competition from non-traditional subprime lenders puts less pressure on independent finance companies to lend to weaker borrowers to maintain their lending volumes” McNally said.

“If lenders maintain this caution, loan losses among newer loans could stabilize,” he continued.

McNally also pointed out that rising interest rates on subprime loans also indicate that lenders are becoming more cautious. Previously, APRs were falling despite the decline in credit, suggesting that competition was strong enough for lenders to leave themselves uncompensated for rising risk levels.

“However, rising loan-to-values and loan terms suggest that lenders are still willing to take on increasing risk,” McNally said. “So we don’t anticipate a major slowdown in subprime lending.”

The report also indicated some lenders could also be more hesitant given the deteriorating performance of recent subprime originations. Analysts cited Experian data that showed delinquency rates in recent originations by finance companies, which grant a high share of their loans to less-than-prime borrowers, are increasing.

Loans originated in 2013 had the highest delinquencies since those originated in 2008, according to Experian.

Moody's expects that new loan volumes will remain high, at least through 2015, because market conditions remain favorable for increased lending.

“The improving labor market, along with pent-up demand in the auto industry, will generate new customers. At the same time, persistently low interest rates, which give lenders low cost of funds, will entice lenders to keep making loans,” McNally said.