The latest data from Equifax showed the number of subprime auto financing originations climbed for the fifth year in a row, surpassing 7 million contracts for the first time since 2007.

Analysts indicated the number of subprime contracts for 2013 came in at 7.3 million, up from 6.6 million a year earlier. Back in 2007, the subprime origination amount was 7.8 million, off slightly from the recent high of 8.1 million set in 2006.

“In 2013, the independent auto finance companies, the non-bank, non-captive, non-credit union companies, really led the way,” said Lou Loquasto, Equifax’s auto finance vertical leader.

Loquasto explained to SubPrime Auto Finance News what is providing the fuel for this continued subprime resurgence.

“We’ve seen new companies come into the market and private equity investing a lot into the market. That’s reflecting in the data,” he said.

“It’s because that’s where the highest yields are. These private equity companies can invest in anything they want. When they decide to invest in auto, it’s always in subprime auto because they’re chasing the highest yields,” Loquasto went on to say.

Equifax most recent data also showed that finance companies are putting more faith in subprime consumers since the loan cap for these contracts ended up above $18,000 in December — the first time that’s happened since December 2006. The cap stood at $18,120 in December 2013, marking a significant five-year rise since bottoming out at $14,753.

Loquasto insisted that climbing cap number is a “sign of health,” in the subprime auto finance sector. He noted that as applicants come from deeper into the credit spectrum, finance companies often consider a credit score as a smaller piece of the decision to book the deal and for what terms.

“What’s happening in the subprime market, the lenders are being more sophisticated and precise as to what subprime borrowers they make loans to,” Loquasto said. “They’re using a lot of other data like income data, employment data and length of time on their job and other alternative data.

“They might be lending more money to that 540 FICO score borrower, but they’re doing it because they know that this guy does make this much in verifiable income a month and they have been on their job for say, eight years. And the alternative data is showing they’re paying their cell phone bill, their cable bill and other utilities, data that a lot of these lenders didn’t have access to before,” he continued.

“It’s more of a reflection of auto lenders using more tools and being able to be more sophisticated in how they lend to that segment. It’s more than just a credit score,” Loquasto added.

With more tools at their disposal, Loquasto is confident subprime originations will stay on their current trajectory.

“We’re thinking it will continue to grow but maybe not at the pace that it’s been growing. We’ll probably continue to see a very methodical increase, eventually getting back to the 2006, 2007 levels,” Loquasto said.