The auto loan business is booming – total auto loans in the U.S. are up 50% from 2010 to December 2015.

But of the more than $1 trillion auto loans outstanding, Experian estimates that between $205 and $388 billion are subprime loans, with 15% to 20% of those loans securitized.

We’ve been here before – though in much worse trouble – back in 2007.

Now, when you consider that U.S. subprime mortgages outstanding in 2007 were $1.3 trillion (based on Ben Bernanke’s remarks from May 2007) and mortgage-backed securities and MBS derivatives based on those subprime loans outstanding probably totaled another $2-$4 trillion, subprime auto loans don’t come close to the depth and breadth of subprime mortgages back in the day.

Still… when the subprime auto bubble pops, it’s going to be messy – and smart traders are going to have the opportunity profit… if they know where to look.

Today, I’m going to break down the growing subprime auto loan bubble, including how we got here and where I think we’re headed.

Then, I’ll show you how to profit…

The Securitization of Subprime Auto Loans

The mortgage meltdown that triggered the Great Recession started with late payments, and right now subprime auto loans are starting to head down the same road.

According to Fitch Ratings the 60 day delinquency rate (loans at least 60 days past due) on an index of securitized subprime auto loans just hit 5.16%. That’s more than during the Great Recession and the highest level since 1996.

Net losses on securitized subprime auto loans are 7.5%, based on S&P data.

The market for subprime auto loans is big and getting bigger every day because more players are getting into the business.

Besides banks like Wells Fargo and Ally Financial that make subprime auto loans, small, rapidly growing non-bank lenders backed by hedge funds and private equity shops are popping up everywhere.