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The defi Team defi INSIGHT, Thought Leadership

auto finance industry trends


Today’s lending market looks very different than it did even just a handful of years ago. More customers are checking auto prices and lending rates online to find the financing companies that offer the best deals. The result: An ultra-transparent and aggressively competitive market.

Lenders can differentiate themselves by embracing the latest auto finance industry trends. Let’s look at three auto finance industry trends that will have the biggest impact in 2020.

The 3 Auto Finance Industry Trends That Will Matter in 2020 

Some of the most important auto finance industry trends of 2020 are related to digital lending and online services. That’s the fastest-growing sector of the lending industry. According to a Research and Markets study, digital lending platform spending will grow to a $12.1 billion industry by 2023, more than doubling in size in under five years.


The three most important auto financing industry trends of 2020 are:


  • Simple, streamlined online financing environments. Customers looking for a new car seek lenders who have user-friendly websites and transparent financing practices.
  • Artificial intelligence and machine learning for auto lending. Lenders can see customers in entirely new perspectives, allowing them to structure new and used auto loans more accurately.
  • Moving to subscription and shared-ownership models. As fewer people buy their own vehicles, lenders need to invent ways to attract future customers.

These three auto lending industry trends are surprisingly simple to integrate into an existing financing system. Here’s how:

#1: Simple, Streamlined Online Financing Environments  

Before the internet, customers trusted auto lenders to offer them the fairest loan structures possible. After all, it was all but impossible for customers to compare loans without going through a long application process with multiple lenders.


Today, customers can access this information online within seconds. With a little internet sleuthing, they can estimate the terms of a loan with a fairly high degree of accuracy. Customers are savvier than ever and want to feel like part of the decision-making process from the start.


This is why modern lenders need streamlined, reliable online systems and loan origination software (LOS) for structuring loans. This has benefits for both customers and lenders.


  • Customers benefit from online auto financing application systems that give them a quick answer. They want to know whether they’re eligible for a loan and don’t want to wait days or weeks for a final decision.
  • Lenders benefit from faster processing and response times. Automated decisions and loan structuring enables them to approve or deny online applications within minutes.

To embrace this auto finance industry trend, lenders should upgrade their LOS systems to support automated decisioning.

Want to find out more about our software and services? Contact our team today.

#2: Artificial Intelligence and Machine Learning for Auto Lending 

Another major auto finance industry trend that will play an even greater role in 2020 is the use of artificial intelligence (AI) and machine learning algorithms to structure loans. In the past, these features were very expensive and required a complete overhaul of the lender’s IT strategy and infrastructure. Now, lenders can easily leverage this innovative technology in the cloud with help from experienced LOS vendors.


Artificial intelligence and machine learning enable auto lenders to assess risk and identify ideal borrowers with incredible accuracy. This technology learns from historical data to predict the likely outcome of any given loan. Lenders can use this technology to:


  • Determine whether an applicant is likely to be delinquent or fraudulent;
  • Assess creditworthiness using both traditional credit data and alternative credit data;
  • Calculate collateral value; 
  • Accurately value used vehicles based on historical data; 
  • Identify target audiences for certain types of auto loans (e.g. used cars or new vehicles);
  • Track capture ratios and approval rates to meet key performance goals; 
  • Conduct customer surveys to identify hidden bottlenecks in the system; and
  • Predict customer behavior and offer vehicles that customers actually want.

Some LOS vendors offer advanced AI and machine learning algorithms. Auto financing companies don’t need any knowledge or experience of AI to use these advanced systems. By integrating AI and machine learning into your LOS system now, you’ll offer the fairest loans to your customers with far less effort.

#3: Moving to Subscription and Shared-Ownership Models 

One trend gaining traction in 2020 is subscription and shared-ownership car loans. Years ago, the only option that customers had was to finance a single car from a lender. This structure didn’t work for every customer, especially those who rarely drive or subprime borrowers who can’t afford a traditional car loan.


People who live in large cities feel especially frustrated by a lack of diverse car loan options. As major cities in the United States expand, available parking also grows more scarce. Additionally, bumper-to-bumper traffic discourages many residents from driving at all.


For these reasons, many city residents are looking to provide rideshare services, move to a subscription lending model, or even share car ownership.


  • A rideshare service is a way for car owners to provide rides to people who don’t own cars in exchange for payment. Auto financing companies need to provide different types of loans for customers who perform rideshare services, as these cars are driven much more frequently and may be at a higher risk of damage. Commercial vehicle loans meet some of these customers’ needs, but in the future, financing companies may offer rideshare-specific loans that are catered specifically to this car ownership model.
  • A subscription lending model is a car loan in which the customer pays a fee to drive a vehicle that’s owned by a third party. Rather than targeting individual borrowers, lenders can instead support this model by offering auto financing to these third-party subscription companies.
  • A shared-ownership model is a car loan in which multiple customers own the same vehicle. This model is still in its infancy. Auto financing institutions are in the process of determining how these loans should be structured from a legal and monetary standpoint.

While we’re still in the early stages of these car ownership trends, they are likely to affect the auto financing industry. It’s important to start thinking about them now.

Should Lenders Embrace These Auto Finance Industry Trends?

All of these auto finance industry trends will play an important role in the lending market in the near future. The most important trend at the moment is the use of online applications and automatic decisioning, as they are already being widely used across the industry.


Within just a few years, the vast majority of auto lenders will be using some form of AI and machine learning to make decisions and track loans. It’s also time to start considering alternative car loan models like shared-ownership and subscription-based lending. This is part of where the future of car ownership is headed.


As long as auto finance companies are open to introducing new technologies into their existing systems, they’ll successfully evolve alongside the industry. Change doesn’t have to be daunting. When you work with experienced LOS vendors that understand the latest auto financing industry trends, you’ll make these transitions gracefully.


Getting Started

defi SOLUTIONS embraces new technologies. From our advanced machine learning algorithms and AI-based systems to our use of alternative credit data for structuring loans, we’ll help you prepare for the future of lending. To get started, contact our team today or register for a FREE demo.


Get in touch with us today and get a demo!


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