In 2025, a seamless experience is one of, if not the most, important factor when it comes to consumer purchasing habits. It is estimated that 54% of all consumers prefer to purchase a vehicle from a dealership they enjoy being at, even if it wasn’t the lowest price offered to them. Moreover, 72% of potential car buyers claim they would visit dealerships more often if the buying process were improved. Even now, without any changes, 7% of vehicle buyers utilize an entirely online experience for the convenience of the purchasing process. Another 43% made sure to complete at least some vehicle buying steps online. But aside from ease of access, car buying has seen some other changes over the years.
Compared to years prior, the diversity of financing methods has decreased. Financing your car via a credit union or other miscellaneous methods has seen an 11.8% and 11.5% decrease, respectively. Monoline financing, or financial institutions that specialize in financing an auto vehicle specifically, also have a 1.2% decrease year-over-year. Conversely, there has been consolidation around more traditional finance methods. Financing directly from the dealer is up a staggering 19.2%. Similarly, financing directly with an automaker is the second highest jump, up 6% compared to recent years.
But financing methods aren’t the only way that consumer finances have shifted. Overall, consumers have strayed away from student loans, as their share of debt is only 29%. This number is down 21.3% from its share of 37% back in 2014. During this same timeframe, auto loans and leases are up to 35.9%, up from 31.3% in 2014. During this period, the total outstanding balances for auto loans and leases are up to $1.7 trillion, which is a 2.3% growth from just the prior year, 2023. As the financial pressure mounts, not all consumers are able to keep up.
Auto delinquencies are categorized as auto loans and leases with payments overdue for 60 days or more. These auto delinquencies have grown by 4.5% between 2023 and 2024. Overall, 1.5% of all auto loans and leases are considered delinquent as of November 2024. Most importantly, this trend disproportionately affects people in different generations.
Older generations, such as Baby Boomers and Generation X, have the lowest percentage of auto delinquency rate, with .7% and 1% of the generations having a delinquent auto loan, respectively. Conversely, the youngest generations, Millennials and Generation Z, account for the highest percentage of auto delinquency at 1.7% and 2.3%, respectively. Alongside this, the number of prime and near-prime loans has decreased. In their stead, it seems that subprime and deep subprime have risen by nearly 5%. These financial pressures have already had an effect on the generation of new auto loans and leases as of November 2024. There was an estimated 1.6% decrease since last year, equating to a $9.2 billion decrease.
Couple these factors with the increasing car prices and the rising vehicle rates, and, unfortunately, these financial pressures incentivize some customers to turn to alternative means of getting a new loan or lease. Customers with poor credit or financial history specifically are taking advantage of synthetic identities, or Syn IDs. These Syn IDs are a vehicle for fraud and have only been growing by 59% annually since 2020. With a Syn ID, you are able to fool traditional methods of background and financial checks.
Even though they are a relatively new scheme, the financial impacts are not unseen. The risk of seeing a Syn ID on an auto loan credit application rose from around 5% in 2019 to over 8% in 2023, marking a 60% increase. Fraud with a Syn ID rose by 98% since 2023, meaning $7.9 billion in losses. In a similar vein, loans and leases that originate with a Syn ID have a delinquency rate 3 to 5 times greater compared to average. But how can you protect your dealership or your business?
Companies like Equifax have created technology meant to rival the prevalence of Syn ID and stop their usage while the customer is still in the dealership. With Know Your Customer (KYC) rules, they help your business proactively try to approach fraud before it can take place. These tools give you insight into the buying power and financial status of a customer while they’re still shopping. Best of all, it makes the buying experience seamless for individuals without a Syn ID. Ultimately, to make sure you know who you’re dealing with, taking advantage of KYC tools from Equifax is essential to keep your business running smoothly.
