Focus on Affordability and Fraud at the Recent Auto Conferences
WHILE THE AUTO INDUSTRY HAS LONG BEEN RESILIENT, customers will continue to navigate through challenging economic conditions like affordability, higher interest rates and fraud this year. These were some of the hot topics of discussion at the nation’s two most preeminent annual auto conferences, which took place in New Orleans at the end of January. Typically attended by more than 23,000 auto dealers, managers and industry partners from around the world, the American Financial Services Association (AFSA) Vehicle Finance Conference and National Automobile Dealers Association (NADA) show covered critical topics shaping the future of the automotive industry.
Macroeconomic challenges took center stage. Over the previous year, auto repair costs have increased by 26%¹ and insurance premiums have surged by over 15%. And, as of December 2024, outstanding balances on auto loans and leases increased 2.4% year-over-year. For auto lenders and dealers, fraud and rising prices often go hand in hand. Fraud rates skyrocketed by 98% in 2024,² leading to an estimated $8 billion in industry losses.
This raises key questions for the industry: How can auto lenders quickly evaluate borrowers’ financial stability while mitigating the risk of fraud and delinquency? How can they ensure they have the most up-to-date information on potential customers? And how can they monitor applications effectively and reduce delays in decision-making?
Smarter Strategies for Modern Auto Lending
Given ongoing affordability challenges around car prices and interest rates, the need to evaluate consumers in the near-prime and prime segment is more important than ever. Additionally, ensuring dealers accurately assess consumers’ total leverage position is critical. With Insight Score for Auto, dealers and lenders can widen their scope to identify and score more consumers, opening up more opportunities for both parties to address affordability.
“Auto lenders are embracing a broader approach to credit assessment,” said Lena Bourgeois, Senior Vice President of Vertical Markets at Equifax. “By incorporating alternative data and leveraging real-time analytics, lenders and dealers can reduce risk while also creating better opportunities for consumers who may be underserved by traditional models.”
Below are three ways lenders and dealers can refine their approach to borrower evaluation and fraud detection:
1. More Frequent and Comprehensive Credit Assessments
Traditional borrower assessments occur annually or bi-annually. However, change is constant in the auto industry, and lenders need frequent credit assessments to fully understand a consumers’ financial position. Shifting to a monthly model, like with Customer Portfolio Review™, allows lenders to gain real-time insights into financial behavior and proactively offer tailored financing solutions, such as payment flexibility or refinancing options, strengthening relationships with borrowers and increasing customer satisfaction.
2. Leveraging AI and Automation for Fraud Detection
Fueled by advancements in AI, fraud is becoming more sophisticated, demanding more robust defenses from lenders and dealers. Tools like Synthetic ID alerts and Document Verification are solutions that can easily fit into the current lender and dealer processes as an added line of defense to help decrease losses from bad actors. Automating fraud detection not only enhances efficiency but also reduces losses, which can help keep the cost of lending down for consumers.
3. Incorporating Alternative Data for Holistic Borrower Evaluations
The traditional credit file provides only part of the financial picture. Alternative data can provide better automobile purchasing opportunities for more people. For example, utility and telecommunications payment history, and employment and education records, offer valuable insights into a consumer’s financial behavior. Leveraging data such as National Consumer Telecom & Utilities Exchange (NCTUE) data can add up to 20 million more consumers to the credit ecosystem, offering deeper visibility into financial stability beyond just subprime segments.
As the industry continues to evolve, dealers, lenders and original equipment manufacturer partners will need access to the right tools and solutions to power their businesses into the future.
Learn more about the solutions Equifax can offer here.
Sources:
- J. D. Power: Auto Insurance Repair Cycle Times Improve but Price Increases Take a Toll, J.D. Power Finds
- Point Predictive: Point Predictive Releases 2024 Auto Lending Fraud Trends Report: Identifies $7.9 Billion Industry Fraud Loss Exposure
(c) Equifax Inc. 2025. All Rights Reserved. The information presented herein is sourced from Equifax internal records and is to be used for general informational use only.