Dealertrack (div. Cox Automotive)’s Credit Availability Index climbed to 101.3 in February, a 6% year-over-year improvement, despite lower approval rates and a widening yield spread.

As in the January report, subprime borrowers continued to fuel the U.S. auto finance market: In February, 17.5% of all originations were for credit challenged car buyers (up from 15.7% in the prior month), the highest rate in nearly a year.

The approval rate for all auto loans fell to 70.9%, down 40 basis points on a year-over-year basis. The difference between loan rates and bond yields increased by 39 bps to 11.2%.

Jonathan Gregory, a Dealertrack senior director, warns that serious concerns underly what appears to be a wide-open market. Increasing numbers of borrowers are trading in vehicles with negative equity (58% in February, up by 540 bps) and opting for 72-month-plus terms (29.3%, up by 480 bps).

“With negative equity reaching an all-time high, lenders increasing exposure in this environment face growing collateral risk, and balancing volume growth with disciplined underwriting will be increasingly important as these risk indicators continue to build,” Gregory writes in a release.

Read more at Cox Automotive