Credit Risk

Revving Up: Essential Strategies for Succeeding in the Evolving Auto Market of 2024

Revving Up: Essential Strategies for Succeeding in the Evolving Auto Market of 2024

February 22, 2024 | Olivia Voltaggio

Shift into high gear

In our energetic February 2024 Market Pulse webinar, our experts presented a roadmap for driving success within the current automotive industry. 

Our special panelists and guests included Robert Wescott, PhD, President of Keybridge Research LLC; Tom O’Neill, Risk Advisory Practice, Equifax; Scott McMahon, Alliance Manager – Auto Enterprise Alliances, Equifax; Steve Greenfield, General Partner, Automotive Ventures; Marguerite Watanabe, President of Connections Insights, LLC; and Jeremy Robb, Senior Director, Economic & Industry Insights, Cox Automotive. 

First we received a macroeconomic update. Then, we reviewed the latest consumer credit trends before engaging in our discussion. Follow along for an overview and make sure to sign up for next month’s webinar so you can be part of the action.

Macroeconomic update

We began our webinar with a 2024 financial forecast with Robert Wescott.

Economic outlook for 2024

The economic outlook for 2024 is optimistic. There are hopes of a "soft landing" for the U.S. economy and the possibility of sustaining the 2.5% GDP growth from the previous year. Yet, several factors state potential challenges ahead. 

First, while job growth surged in January, there may be a softening in the labor market as certain sectors approach equilibrium. Second, concerns are arising about consumer spending sustainability, with signs of stress, such as increased auto loan and credit card delinquencies, emerging. Additionally, contrary to headline news, inflation remains a concern. Certain critical service-sector inflation indicators have not shown improvement. 

Another factor to track is public and private investment. Infrastructure and GHG-reducing technology have contributed to economic growth but may face challenges in implementation and delays. 

Overall, the prevailing narrative of a smooth economic transition and conquered inflation might still be overly optimistic, with expectations of slower growth and potential setbacks in disinflation looming in the coming year.

The automotive industry and the macroeconomy

The U.S. auto sales market is recovering from the impact of COVID, approaching the desirable 16 million units per year range. This signals a return to normalcy. With inventories rebounding to typical levels after a dramatic decline during the pandemic, auto dealers are poised to support this recovery. 

This increase in inventory is expected to reduce some price pressures, particularly as surging new car prices have dissuaded potential buyers. Despite optimistic forecasts of electric vehicle (EV) market share reaching 30% by 2026, such projections may be overly hopeful.

Consumer credit trends

Below is a snapshot of current credit trends from Tom O’Neill.


●  First mortgage originations through October 2023 continue to be lower and have fallen below 2015 levels. Home equity YTD originations have decreased from 2022 even as the subprime share is at the highest level in over 10 years.

  October 2023 YTD bank card dollar limit originations continue to grow YoY; subprime share has declined since its high in 2021, and the number of new cards originated October YTD is lower than 2022.

●  YTD through October 2023, unsecured PL dollar originations balances have seen a steep decline; subprime share has risen slightly, and the number of new loans originated October YTD is also down.

●  October 2023 YTD auto loan unit originations have dropped by nearly 8% YoY with subprime share continuing an eight-year decline. Auto loan dollar originations have fallen over 10% YoY.

●  However, YTD auto lease originations have seen a dramatic YoY increase of about 45% in both dollars and units originated over 2022.

●  Originations for auto loans and lease have indexed to January 2020 (beginning of pandemic); October 2023 has shown indexed totals of 88.2% (loans) and 68.5% (leases) of 2020 levels for units and 111.5% (loans) and 89.6% (leases) for dollars originated.

●  Filtered for prime originations only, October 2023 has shown indexed totals of 96.4% (loans) and 71.2% (leases) of 2020 levels for units and 120.3% (loans) and 93.0% (leases) for dollars originated.

Debt, utilization, and delinquencies

●  Mortgage debt is at $12.5T and has increased, and non-mortgage debt has ticked slightly up.

  Revolving debt in December 2023 was at its highest level; non-revolving debt has remained relatively level.

●  Auto loan debt in December 2023 was at its highest level; auto lease debt has decreased again this month.

●  Utilization has increased for bank card, private label card, and home equity lines. Credit limits have risen for bank card as well as for home equity.

●  Delinquencies on auto, auto loans, auto lease, bank card, private label card, and first mortgage have risen MoM.

Discussion: Navigating the automotive industry in 2024

Finally, we were joined by Scott McMahon, Steve Greenfield, Marguerite Watanabe, and Jeremy Robb for a conversation on strategies and insights around navigating the auto industry in 2024.

While they covered many timely topics, our experts’ key takeaways involved how affordability and the supply chain are affecting automotive sales.

The electric vehicle impact

We learned that the current penetration rate stands at only around 22-23%. This is 10 points below the norm, significantly impacting the supply of used vehicles. A predominant concern for the year is the impending decrease in lease maturities, expected to dry up notably in the second half. This could create a lag effect until leasing activity rebounds. Lease penetration is contingent upon manufacturer incentives rather than individual preferences, highlighting the pivotal role of incentives in driving market shifts, particularly toward EVs, which can be beneficial to dealers. 

While EV leasing is on the rise due to tax incentives, there is a plea for manufacturers to increase leasing options to alleviate supply constraints, as seen in discussions urging companies to expand their leasing programs. Amidst industry shifts, there is a continuous dialogue about the trajectory of the automotive market, with discussions evolving weekly as dynamics change.

What about auto loans?

Panelists highlighted the decline in loan origination as a significant topic of concern. Despite widespread apprehensions and predictions of doom regarding repossession rates last year, the actual numbers have indicated a growth that has plateaued, remaining roughly at 2019 levels. This stagnation in repossession rates can be attributed to the parallel decline in the loan base and presents a challenging landscape for significant growth in repossession rates. This observation underscores the importance of providing a clear understanding of the current state of affairs, shedding light on the reality of the situation and its implications for stakeholders in the industry.

Affordability, affordability, affordability

Affordability is a significant and recurrent topic deserving considerable attention. While the issue has been predominantly negative, there are signs of improvement, albeit small. Despite challenges, such as affordability concerns on the new car side (including with incentives), there have been slight decreases in prices over the past couple of years, leading to increased demand despite limited supply. It is crucial to acknowledge the persistence of high interest rates, which continue to impact affordability and payments negatively. Nonetheless, these modest improvements signify a potential shift toward a more balanced market environment. 

In the midst of discussions about affordability, the panelists noted a sense of apprehension as individuals contemplate the financial strain they face. There is a realization of the bubble consumers find themselves in, particularly when considering the rising volumes of bank card spending. The high values and payments associated with cars are causing concern, exacerbated by the additional burden of student loan debt for many. This complex financial landscape presents a significant challenge, especially in terms of credit risk assessment, with numerous variables at play. Amidst discussions about changing collateral, individual creditworthiness, and evolving manufacturer and dealer models, experts recognize the multitude of factors influencing the industry. 

Despite uncertainties about the future, there is acknowledgment of the need to adapt swiftly to these changes, whether through traditional dealership models or the potential emergence of direct sales approaches.

In conclusion

The way to stay ahead of the changing economy is to stay in touch with what Equifax has to offer. Check out our monthly Small Business Indices[2] report. And, sign up to ensure you never miss a Market Pulse[3]  resource.

Olivia Voltaggio

Olivia Voltaggio

Senior Content Manager, US Information Solutions

Olivia joined Equifax in 2019. She graduated from the University of Illinois at Urbana-Champaign with a Bachelor of Science degree in advertising and a Bachelor of Arts degree in English. Olivia holds an Editing Certificate from the University of Chicago Graham School.