It's not just, risky, it's insane. The GPUs lose value almost as soon as they're installed.

On the other hand, auto loans are a thing. It’s all a question of how the assets are valued.

Do you mean car title loans? Because that's basically what the GPU-backed loans are. Car title loans have terrible terms due to the diminishing value of the car. These GPU-backed loans are being booked at much, much more favorable terms, as if the GPU holds its value for a long time. This simply isn't the case, so if the loan is defaulted on, the loaner will have a rude awakening when all they get are worthless GPUs.

Isn't that part of why down payments are so necessary? It takes the loan amount below the immediate depreciation amount of the asset so the bank/lender is less exposed to the risk.

I’d imagine the main benefit of downpayments to be behavioral, since otherwise the borrower has no stake in the asset initially.

I doubt that's the main driver for lenders and people are generally pretty attached to and excited about their new cars. They also do have a stake they'll still be out time and money even if insurance covered the entire cost of the vehicle.

I wasn’t really thinking about people wrecking their cars, but rather about making future payments.

Losing the use of a car and your equity in it to repossession is much worse than losing somebody else’s car alone.

I don't care as long as the bank losing on it wouldn't be bailed out with my money. Which unfortunately is a common thing now.