Navigating the Road Ahead: Key Insights from Auto Lenders

Highlights: 

• Fraud, especially income/employment misrepresentation, is a major concern for auto lenders, who believe industry-wide collaboration and advanced data solutions are crucial to combat it while maintaining deal speed and customer experience.

• Despite economic uncertainties, auto lenders are generally optimistic and focused on growth, aiming to approve more loans, but are hindered by outdated or incomplete data for efficient decisioning.

• The adoption of AI in auto lending is progressing, with over half of organizations incorporating it, yet significant challenges remain, including a scarcity of skilled talent and lingering doubts about its broader application and ethical implications.

The automotive lending landscape is a dynamic one, constantly reshaped by economic shifts, technological advancements, and evolving consumer behaviors. To better understand the pulse of this critical industry, we recently asked over two dozen leaders from across the auto lending industry about the biggest challenges, opportunities, and priorities impacting their organization and shaping the future of auto lending.

Fraud: The Ever-Present Problem

Unsurprisingly, fraud emerged as the most common pain point for auto lenders. A significant 67% of respondents highlighted that they believe the intense pressure for fast and easy deals makes the auto industry an attractive target for fraudsters. This underscores a critical tension: the need for speed to secure deals in a highly competitive market often inadvertently creates vulnerabilities.

When asked about the types of fraud they most commonly encounter, 60% of lenders pointed to income and employment misrepresentation. This is a clear indicator that verifying applicant data remains a paramount concern. Beyond misrepresentation, other prevalent fraud schemes identified included synthetic ID fraud and bust-outs, both of which can lead to significant financial losses. And some lenders feel a unified approach involving dealers, lenders, and connectors is essential to bridge the gaps that fraudsters exploit. Industry-wide collaboration is not just a recommendation; it's a necessity to build a more resilient ecosystem.

Today lenders have more tools than ever to fight fraud, and savvy lenders know they must balance deal speed and customer experience. A waterfall approach, created by pulling in different solutions throughout different stages of the application process, with unique data not broadly available in the industry strikes the right balance. 

Macroeconomic Currents: Optimism in a Shifting Climate

Despite conflicting economic indicators that raise concerns for 60% of auto lenders, the overall sentiment regarding the macroeconomic outlook over the next 12-18 months leans towards optimism, with over half of respondents saying they feel “somewhat optimistic.” This measured outlook could reflect the popular decision to focus on growth rather than contraction with 64% of those surveyed declaring they are actively seeking more ways to say yes to applicants. Such a proactive stance reflects a desire to capitalize on market opportunities and support consumer access to financing.

It's also worth noting that while the primary focus is on expanding approvals, 20% of respondents claimed their organizations have increased their focus on collection strategies as a response to the current market environment. Auto lenders are clearly navigating a changing macroeconomic situation, and a deeper, more specific understanding of the state of the market is crucial to confidently approve more applications.

Originations have been the trend for so many years, but as lenders look more closely at account management and collection, regular updates to scores and contact information using 3rd party data provides a tremendous lift to collection strategies.

Decisioning: The Need for Clearer Vision

Efficient and accurate decisioning is the bedrock of successful auto lending. However, the survey revealed a significant hurdle: over a third of auto lenders reported that outdated or incomplete credit data presents a substantial roadblock to approving new loan applications. This finding is particularly striking given the strong desire among lenders to approve more loans.

In a market where lenders are striving to increase approvals, the ability to access comprehensive, up-to-date, and accurate data is paramount. Such data empowers lenders to assess risks more precisely within this dynamic environment, ultimately enabling them to say "yes" to more deserving applicants while maintaining sound risk management practices.

Leveraging multiple credit files when decisioning loans, by using tools like PreApproval of One for Indirect Auto from Equifax, can add tremendous insights into your lending decision. 

On Artificial Intelligence

The conversation around artificial intelligence (AI) and its integration into auto lending highlights both promise and practical challenges. While 56% of respondents indicated their organizations have already begun incorporating AI into some areas of their business with an eye towards doing even more with it in the future, a significant hurdle remains: half identified the scarcity of skilled talent as the primary obstacle slowing greater AI adoption. 

Furthermore, the discussion revealed that many auto lenders still harbor doubts regarding the broader application of AI. While some have embraced it, 22% said they are still "figuring out what AI can do for them," and 6% are just beginning to explore its possibilities. Ethical concerns and the pursuit of fair AI also emerged as important considerations, with 20% of lenders citing them as hurdles to their broader implementation, indicating a growing awareness of the responsible implementation of AI. Learn more about the Equifax commitment to responsible AI.

Charting a Course for the Future of Auto Lending

The insights gleaned from this series of polls paint a complex picture of an industry striving for growth amidst evolving challenges. From the persistent fight against fraud and the strategic navigation of macroeconomic shifts to the critical need for robust data and the strategic adoption of AI, some auto lenders are actively seeking solutions that enable them to "say yes" more often, more safely, and more efficiently. 

Discover how Equifax supports auto lenders with data-driven solutions.

Source: 

1. Equifax, Auto Lender Roundtable, 2025