Navigating the Automotive Landscape in 2025: Preparing and Pivoting for Success

It’s a pivotal time for the automotive industry, one filled with both challenges and significant opportunities. This sector is used to navigating through the ever changing nature of the economy. The past year has been demanding, and 2025 will require continued adaptability.

The Auto Industry Now

The automotive industry's impact is undeniable. It contributes 5% to the total U.S. GDP, employs over 10 million individuals, and generates substantial revenue and tax income. This industry is a powerhouse, and its resilience, even during difficult times, is remarkable. However, consumers have faced considerable hurdles. Car repairs rose by 8% last year, insurance premiums by nearly 20%, and car prices surged by 25%. Adding to this, interest rates have climbed a staggering 80%, pushing average new car payments above $750 per month and used car payments over $550 per month.

Consumer debt in auto loans and leases has surpassed $1.7 trillion, exceeding credit card and student loan debt. Delinquencies have increased by 7% year-over-year, hitting a three-year high, and fraud rates have alarmingly risen by 98%, contributing to approximately $8 billion in losses. It's observed that auto leases with synthetic ID risk have five times the delinquency rate compared to the average, a 60% increase in the last four years.

Despite these challenges, the automotive industry is poised for growth. Americans prioritize their auto payments, and as more people return to in-office work, the need for vehicles will likely rise.

Preparing for the Year Ahead in Auto

To succeed in this ever-evolving landscape, businesses must be prepared. Change is inevitable, so scenario planning is crucial. What if interest rates rise? What if they do, indeed, fall? Develop strategies using data, automation, AI, and robust reporting to adapt swiftly to new events and challenges.

For 2025, focus is recommended on four key areas:

1. Frequent valuations of borrower financial stability: Move beyond quarterly or annual reviews. A consumer's financial situation can shift rapidly—within weeks, not months. Real-time insights are vital.

2. Establish proactive notifications and treatment plans: Implement notifications for financial fluctuations and create clear plans to manage risk. Leverage automation, machine learning, and AI to activate these plans effectively.

3. Utilize alternative data sources: Expand beyond traditional credit files to gain a holistic view. Include payment records, income sources, employment status, and alternative loan data. This can significantly increase the number of consumers in the database and provide greater insight into existing profiles.

4. Leverage marketing competitive insights: Understand market position and application share. Identify where applications are being lost and optimize strategy geographically to maximize market share.

2025 holds great promise for the automotive industry. By embracing data-driven strategies, prioritizing consumer financial health, and remaining agile, the challenges can be navigated and the opportunities capitalized upon. All available data tools should be utilized to ensure even greater success in the coming year.

(c) Equifax Inc. 2025. All Rights Reserved. The information provided herein was derived from Equifax's internal records and is to be used for informational purposes only.