In 2025, buying a car has changed quite a bit compared to several decades ago. Whereas your only option in 1985 might’ve been to find a dealership and buy it from there, that is no longer necessarily the case. 7% of vehicle buyers purchased their vehicles entirely via virtual means, while a staggering 43% of vehicle buyers completed at least some car buying steps online. This makes the customer experience when at a dealership even more important than ever. In fact, over half of all consumers claimed that they would buy from a dealership they had a better experience at, even if it wasn’t the lowest price offered to them. Another 72% said they would ditch the virtual methods and go directly to physical dealerships if the buying process was improved. So, with this in mind, what other changes in the car buying process has an effect on consumer behavior.
With the many different options of car buying that have sprouted up in recent years, the popularity in buying a car has become more accessible. Compared to 2014, the share of debt of auto loans and leases increased by 14.7%. This brought the share of auto loans and leases to 31.3% to 35.9% of the proportion of consumer finances. However, this is also a part of the bigger picture of consumer finances. In general, the debt for outstanding balances for auto loans and leases is up 2.3% since last year, coming to a grand total of $1.7 trillion.
When it comes to the types of financing, that too has changed. The financing types have seen a lot less diversification than previous years. Alternative methods, such as auto loans via credit unions or other miscellaneous methods saw a fall of 11.5% or higher. Monoline, or financial institutions who specialize in auto loans alone, also saw a fall of around 1.2%. Adversely, financing an auto loan with a bank saw a growth of 1.6%. Additionally, financing directly with an automotive maker went up by 6% and financing directly with the car dealership went up by a whopping 19.2%.
With all these complications and growth in consumers’ liabilities, auto delinquencies are bound to increase. Auto delinquencies are defined as loans or leases with payments that are 60 days past due or more. Statistically, these delinquencies have grown 4.5% year over year, and account for 1.5% of all auto loans and leases as of November 2024. However, these delinquencies are not equal amongst all vehicle owners. Older generations, such as Baby Boomers and Generation X, account for the lowest percentages of auto delinquencies. Conversely, Millennials and Generation Z, the youngest generations, account for the highest percentages at 1.7% and 2.3% respectively.
This bodes poorly for the future of dealerships and other auto financing institutions. The greater the percentage of younger generations that have auto delinquencies means the less likely that these consumers will finish these loans or finance another vehicle. In a similar auto trend, the category of prime and near prime have seen year over year decreases. Since 2024, near-prime accounts have fallen 0.6% and prime accounts have fallen 2.4%. Alternatively, both subprime and deep subprime accounts saw a 4.8% increase in the same timeframe.
There are many underlying factors that lead to poorer loan quality and increasing financial pressures, with the simplest being the underlying asset of the loan. Since 2016, new cars have seen a massive 34% increase in vehicle price. As a result, this pushes the average new vehicle interest rate for 60-month new car loans jumping from 4.26% to 7.57%, or a 56% increase.
While all these financial factors can be difficult enough for dealerships and financial institutions, these issues are thoroughly compounded by the existence of synthetic identities (Syn ID’s). In general, auto loan credit applications with a risk of a Syn ID rose from under 5% to just over 8% from 2019 to 2023, or a 60% increase. Similarly, Syn ID’s have increased annually since 2020. And, when analyzing loans with a Syn ID, these loans had fraud rose by 98% in 2023 alone, and cost around $7.9 billion in losses. Alongside this fraud, loans and leases with a Syn ID have a delinquency rate between 3 to 5 times higher than loans and leases without a Syn ID.
Fortunately, Equifax provides new technology that can help prevent you from becoming a victim of Syn ID’s. They offer Know Your Customer (KYC) technologies, which allow you to proactively detect potential fraud concerns. It works by giving you insights into the buying power of the consumer while they are still in the shopping process and before they have signed any paperwork with you. If you want to make sure that you know who you’re doing business with, taking advantage of the technology from companies like Equifax is the way to go.
