vehicle remarketing services

AUTO FINANCE INDUSTRY TRENDS 2023

The defi Team defi INSIGHT, Originations

auto finance industry trends

Today’s lending market looks very different than it did just a few years ago. With an increasing number of loan applicants checking out auto prices and lending rates online, consumers are able to quickly ascertain which lenders offer the best deals. In this ultra-competitive lending market, lenders can differentiate themselves from their competition by embracing the latest auto finance industry trends. 2023 is already looking to be a year where technology will continue to rapidly transform the industry.


Those lenders digitizing their processes are faring better than those who continue to rely on manual processes. This rapid digitization, coming on the back end of a worldwide pandemic, has facilitated contactless interactions and transitions among dealers, lenders, and borrowers. This has led to quicker loan originations and other processing, along with lower costs. As a result of the lessons learned during the economic pause created by the pandemic, lenders are aggressively adopting automated technology to optimize their capabilities while also considering new trends in auto ownership.

Let’s look at three important auto finance industry trends in 2023 that will have a huge impact for both lenders and borrowers alike.

Three Auto Finance Industry Trends for 2023

Some of the most important auto finance industry trends of 2023 are related to digital lending and online services. That’s the fastest-growing sector within the lending industry. According to a Research and Markets study, digital lending platform spending is expected to grow from $10.7 billion in 2023 to a $20.5 billion industry by 2026, almost doubling in size in under five years.

Three of the most important auto financing industry trends of 2023 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 (AI) and machine learning for auto lending – Lenders can see customers from entirely new perspectives, allowing them to structure new and used auto loans with greater accuracy.
  • 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 can easily be integrated into existing financing systems. Here’s how:

#1: Simple, Streamlined Online Financing Environments

Before the internet, customers trusted auto lenders to offer the fairest loan structures possible. Comparing loan terms was a much more difficult process back then, as each loan application had to go through a drawn-out, manual process with multiple lenders.


Today’s consumers can access this information online within seconds. With a little internet sleuthing, they can estimate the terms of a loan fairly accurately. 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 benefits both customers and lenders.


  • Customers benefit from online auto financing application systems that provide quick loan decisions. With today’s cutting-edge technology, it doesn’t take days or weeks to get a final decision, but rather minutes.
  • Lenders benefit from faster processing and response times. Automating decisions and loan structuring enables them to approve or deny online applications within minutes.

Lenders should upgrade their loan origination systems (LOS) to support automated decisions. To do so, they must take advantage of these technologies that enhance auto finance. Industry trends for 2023 show this march toward digitization continuing.

#2: Artificial Intelligence and Machine Learning for Auto Lending

Another major auto finance industry trend that will play an even greater role in 2023 involves using AI and machine learning algorithms. These technologies are used to structure loans, and advances in both have made them more cost-effective, even for smaller lenders. In the past, such features were expensive and required a complete overhaul of a lender’s IT infrastructure. By developing a strategy based on innovative new technology, lenders can now easily leverage innovative cloud-based technology offered by experienced LOS vendors.

Artificial intelligence and machine learning enable auto lenders to quickly assess risk with greater accuracy, helping to identify a lender’s ideal borrowers. These technologies work together, utilizing historical data to predict likely outcomes for loans. Lenders can use this technology to:


  • Determine whether an applicant is likely to be delinquent.
  • Conclude whether specific applications contain fraudulent or misrepresented information.
  • 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 or leases.
  • Track capture ratios and approval rates in order to meet key performance goals.
  • Conduct customer surveys to identify hidden bottlenecks within a lender’s system and processes.
  • Predict customer behavior and offer vehicles that customers actually want.

The most forward-looking LOS vendors offer advanced AI and machine learning algorithms in their software. Best of all, auto financing companies don’t need any special knowledge or experience with these technologies 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 of the other auto finance industry trends in 2023 involves changing dynamics in how people finance and own personal vehicles. Formerly, the only option customers had for financing car ownership meant a person applying for a loan from a lender for a single vehicle. A new structure of ownership has since developed for subprime borrowers who can’t afford a traditional car loan and those who rarely drive.

Ownership and financing models like car subscriptions and shared-ownership car loans continue to gain traction. These models are especially useful for those living in large cities, where congested streets and scarce parking discourage many people from driving at all. For these reasons, many city residents look to other options, like rideshare services, subscription lending models, or even car sharing services.

Lenders need to know how they can serve these unconventional ownership models, which could include:


  • Rideshare services allow car owners to provide rides to people who don’t own cars in exchange for payment. Auto financing companies must provide different types of loans for customers who perform rideshare services, as their owners drive these cars much more frequently, presenting higher risks for accidents. Commercial vehicle loans meet some of the needs of such borrowers, but in the future, lenders may find a niche by offering rideshare-specific loans.

  • Subscription lending models entail providing a loan to a third-party owner who then charges a fee to customers who drive the vehicle. Rather than a traditional loan given to individual borrowers, lenders can instead finance these third-party subscription companies.

  • Shared ownership models encompass car loans where multiple customers own and make payments on the same vehicle. Still in its infancy, lenders should determine how they can structure this untraditional financing method and determine these loans from a legal and monetary standpoint.

Though in their early stages, many of these alternative means of driving and ownership of vehicles look to bring substantial change to the auto finance industry. Trends in 2023 and beyond indicate they’ll become more common in the future, so lenders should start thinking about how to react to them now.

Should Lenders Embrace These Auto Finance Industry Trends?

All of these auto finance industry trends will continue to play an important role in the lending market in the near future. However, the most important trend at the moment is the use of online applications and automated decisions, as digitalization is already being widely used across the industry.

Within just a few years, the vast majority of auto lenders will use 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. These models look to be the future of car ownership for a growing segment of the population.

To evolve successfully, lenders must become open to introducing new technologies into their existing systems, as per current auto finance industry trends. 2023 and the future will bring change, but change doesn’t have to be daunting. When lenders work with experienced LOS vendors that understand the latest auto financing industry trends, they can make these transitions gracefully.

Getting Started

defi SOLUTIONS offers solutions for a lender’s complete loan or lease lifecycle. Partnering with captives, banks, credit unions, and finance companies, defi’s market-leading solution helps lenders exceed borrower expectations. From digital engagement through the complete lending process, defi sets new standards for flexibility, configurability, and scalability in originations, servicing, and managed servicing. defi SOLUTIONS has the backing of Warburg Pincus, Bain Capital Ventures, and Fiserv. For more information on auto finance industry trends and how defi can keep you ahead, please visit www.defisolutions.com.

(Visited 5,661 times, 1 visits today)