Consumer behaviors are changing, which is pushing the auto industry to adapt. Although the auto industry faces several challenges, such as decreasing sales, increasing fraud, and increasing delinquency, opportunities are also growing. Pivoting tactics can help the auto industry take advantage of these opportunities. For example, focusing on consumer experience, as well as implementing proactive fraud prevention measures, can go a long way in boosting sales and overall success.
The state of consumer finances in 2025 is rocky, and has pushed many consumers to make different economic decisions. This is clear in the auto industry. For example, debt for auto loans and leases has risen nearly 15% in the last 10 years. The current total outstanding balances for auto loans and leases are $1.7 trillion, which is up 2.3% YoY. Auto loans and leases now make up 35.9% of total non-mortgage consumer debt, which is more than student loans and bankcards.
Financial pressures are also leading to fewer cars being sold. In fact, auto loan and lease originations dropped 1.6% YoY in September 2024, which equals a $9.2 billion decrease in sales. At the same time, vehicle prices and interest rates are rising, which further challenges the consumer. More specifically, the average new vehicle price has increased by 34% over the course of the last eight years, and interest rates have gone up by 56% over the same time period.
These economic stressors may be contributing to increased fraud in the auto industry. Since 2020, synthetic identities have increased by 59% every year. Auto loan credit applications with a risk of synthetic identity fraud rose from ~5% in 2019 to ~ +8% in 2023. This is a 60% increase over the course of 4 years.
Increased fraud often goes hand-in-hand with increased delinquency. For example, loans and leases with risk of synthetic identity have a delinquency rate three to five times higher than the portfolio average. Current data has shown that delinquencies are indeed increasing; in fact, 1.5% of all auto loans and leases ended up as delinquencies between January and November 2024. This marks a 4.5% increase YoY.
The number of accounts tied to deep subprime and subprime borrowers also experienced increased growth, making these the two fastest-growing score bands. In terms of the percentage of total accounts per score band, both deep subprime and subprime bands experienced a 4.8% increase YoY. On the other hand, near-prime and prime bands experienced a decrease in accounts, and super-prime only experienced a 0.8% increase YoY.
These are substantial challenges, but innovative solutions open up new paths forward for the auto industry. For starters, investing in the buying experience is critical. 72% of consumers report that they would visit dealerships more if the buying process were improved. Using Know Your Customer (KYC) tools such as OneScore, auto dealerships can better cater to their customers and enhance the experience.
Another tool is proactive fraud prevention. The Digital Identity Trust is one example of a fraud prevention measure, and it can go a long way in lowering instances of fraud. Working with a company like Equifax can further streamline this process, as Equifax specializes in KYC tools and data-driven insights that can propel an auto dealership to success. Despite challenges, there are many solutions, and the auto industry has the chance to find even greater success in the new year.