80 percent of today’s consumers think that new car ownership is out of reach for them*. Pair this with continuing high interest rates, vehicle prices and rising delinquencies, there is a lot on the minds of dealers, lenders, manufacturers and millions of consumers. The auto industry needs to respond to these challenges by leveraging data and analytics to manage portfolios effectively and address delinquency concerns. Below Risk Advisor Tom Aliff provides insight into the current state of delinquencies, declining automotive prices and more. 

Q1: Can you provide an overview of the current state of the auto market and its recent trends?

Tom Aliff: Certainly. Over the past couple of years, the auto market has expanded significantly, now comprising 34.3 percent of the total non mortgage market*. This represents a 3.4 percent increase from the previous year in terms of total balance*. However, alongside this growth, we've also observed a rise in delinquencies, which has garnered attention in recent headlines. In fact, we've seen a notable 1.59 percent increase in delinquencies at the start of this year*, marking the highest level since the Great Recession.

Q2: What factors are contributing to the increase in delinquencies, and how are lenders and consumers responding to these challenges?

Tom Aliff: Despite the uptick in delinquencies, there are several positive indicators worth noting. One significant factor is the rise in incentives, which have increased from approximately 2.5 percent to over 5.7 percent*. Additionally, price declines, particularly in the higher end luxury market, have also played a role, with year over year declines averaging around 3.5 percent*. These trends present both opportunities and challenges for lenders and consumers alike.

Q3: How are lenders leveraging data and analytics to address delinquency concerns and manage their portfolios effectively?

Tom Aliff: Lenders are employing thoughtful data and analytics strategies to tackle delinquency issues and manage their portfolios more effectively. By leveraging advanced analytics, they can gain deeper insights into consumer behavior, identify potential risks, and tailor their lending strategies accordingly. This proactive approach allows lenders to mitigate risks associated with delinquencies and optimize their portfolio performance.

Q4: With declining prices and increasing incentives, how is this impacting consumer lending and auto sales?

Tom Aliff: The combination of declining prices and rising incentives has created an opportunity for lenders to approve more loans for consumers. This, in turn, is expected to stimulate auto sales, potentially restoring them to previous levels. The favorable lending environment, coupled with anticipated interest rate declines later in the year, bodes well for continued growth in the auto market and increased consumer access to financing options.

Q5: What strategies can lenders employ to capitalize on the current market conditions while effectively managing risk?

Tom Aliff: To capitalize on the current market conditions while managing risk, lenders can adopt a multifaceted approach. This includes leveraging data driven insights to identify creditworthy consumers, implementing robust risk assessment processes, and offering tailored financing options to meet diverse consumer needs. Additionally, proactive portfolio management, coupled with continuous monitoring and adjustment, is essential to mitigate potential delinquency risks and ensure long term portfolio health.

Q6: Looking ahead, what are the key factors that lenders and consumers should monitor in the auto market?

Tom Aliff: As we look ahead, lenders and consumers should closely monitor several key factors in the auto market. These include interest rate movements, economic indicators, consumer sentiment, and regulatory developments. By staying informed and agile, lenders can adapt their strategies in response to changing market dynamics, while consumers can make informed decisions about their auto financing options. Ultimately, collaboration between lenders, consumers, and industry stakeholders will be crucial in navigating the evolving landscape of the auto market.

In conclusion, the auto market presents both opportunities and challenges for lenders and consumers alike. By leveraging data driven insights, implementing proactive risk management strategies, and staying abreast of market trends, stakeholders can position themselves for success in this dynamic environment. With careful planning and prudent decision making, the auto market can continue to thrive while effectively managing risks associated with delinquencies and economic fluctuations. Learn more. 

* Equifax data

** All of the statistics provided in this publication are developed by Equifax statisticians based upon existing marketplace data; this data is provided for information purposes only and is not to be used for purposes other than informational discussion of market-place trends.