The auto industry is experiencing massive challenges, but new opportunities are also on the rise. Using data, the industry can identify the best path forward, one that prioritizes proactive fraud prevention and improved consumer experiences.
Fraud is rising in the auto industry, presenting a major problem. Since 2020, synthetic identities (Syn ID) have increased by 59%. Auto loan credit applications with a risk of Syn ID rose from roughly 5% in 2019 to +8% in 2023. Rising fraud also leads to rising delinquency rates; loans and leases with a Syn ID risk have a delinquency rate three to five times higher than the portfolio average. Understanding trends in fraud is important, as certain lender types may be more impacted by fraud and delinquencies than others.
Part of the reason for increasing fraud and delinquency is that consumers are suffering financial pressures. Auto debts are growing, as are prices and interest rates. For example, the average new vehicle price has increased by 34% over the past eight years. Interest rates are 56% higher in 2024 than in 2016.
For the auto industry, a key tactic moving forward will be proactive fraud prevention. Solutions exist for this, such as the Digital Idenity Trust. Another major strategy should be improving the buying experience. Connecting with customers helps both the consumer and the dealership and will be a key step in addressing current challenges in the industry.
