What did the Annual Auto Shows Reveal About the State of the Industry?
Equifax, along with more than 23,000 auto dealers and managers, Original Equipment Manufacturer (OEM) executives, auto lenders, and auto industry partners from around the world gathered in Las Vegas the first week in February for the American Financial Services Association (AFSA) Vehicle Finance Conference, National Automobile Dealer’s Association (NADA) and J.D. Power Auto Summit shows.
Economists at the recent shows shared their expectations for the auto industry this year, with NADA data suggesting that the industry could reach 15.9 million vehicle sales in 2024, and may even grow to 16.5 million in 2025. In addition to industry growth being a hot topic, there were other topics that continued to come up - affordability, fraud, and the future of electric vehicles - as they impact all stakeholders of the auto industry.
How much can auto shoppers afford?
Many dealership executives and lenders talked about the value of data in today’s industry, sharing that they’re looking at various tools and resources now more than ever in an effort to get a more accurate financial picture of a potential buyer and help connect them with the right car.
Alternative data, consumer insights not found in traditional credit reports such as telecommunications, pay TV, and utilities payment history, can provide additional information to help qualify individuals for loans or terms they may not have previously been candidates for under the legacy scoring attributes. With these additional insights, such as Insight Score for Auto provided by Equifax, auto dealers and lenders can widen their scope to identify and score more consumers, opening up more opportunities for both parties to address affordability.
Additionally, auto industry marketers are looking for ways to optimize their spend as well as understand how to better personalize an auto shopper’s experience. By leveraging unique wealth, economic, and credit-based insights, auto marketers can identify the in-market auto shoppers ready to purchase a vehicle immediately and create meaningful interactions across the car buying journey, improving the overall customer experience from beginning to end.
How will fraud continue to have an impact?
As the impact of fraud on the auto industry continues to grow, lenders and dealers alike are looking at what tools and checks they can add to their process to stop fraudsters early. Fraud was the topic front and center during a tri-bureau panel at NADA, with a focus on educating dealers on how to identify fraud within their respective dealerships.
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. Cox Automotive announced at the NADA show that they will add Synthetic ID Fraud Alert to their Dealertrack capability, a solution integrated with best-in-class fraud detection from Equifax, helping to protect dealers against fraudulent transactions earlier in the Finance & Insurance (F&I) process.
Insights on today’s electric vehicle (EV) shopper
EVs were another hot topic. The near-term prospects of EV growth are still being defined, with many in the industry unable to identify the path of adoption without a reliable charge network. Today’s consumers enjoy having the choice of gas-powered, electric and hybrid vehicles. However, government mandates and regulations are certainly influencing the adoption of electrification.
In terms of the loan profile of today’s EV buyer, recent data compiled by Equifax shows that:
~20% of EV sales are used vehicles. In 2023Q1 vs 2022Q1, EV share in new cars grew by ~46% and EV share in Used cars grew by ~14%.
Used EV has (~30%) higher borrowing amount than used non-EV; used EV has slightly lower (~15%) borrowing amount than new EV.
Used EV has (~$300) lower monthly payment amount than new EV, but slightly higher (~$200) than new non-EV.
EV interest rate is (20-25%) lower than Non-EV (for new and used respectively); Used EV has (~40%) higher interest rates than new EV
This year’s auto shows were filled with optimism and excitement for the automotive industry as a whole. Dealers, lenders and OEM partners are looking for the right tools and solutions now more than ever to power their businesses into the future.
Equifax produces its Auto Credit Trends data reports each month, designed to provide automotive professionals with the latest auto credit information to help them make informed decisions.