Winning in the 2025 Auto Lending Market
By Devon Kinkead
The latest Experian State of the Automotive Finance Market Q2 2025 report delivers a clear message: banks are back as the dominant force in auto lending, and the opportunity for market share expansion has never been greater. For financial institutions leveraging advanced prescreen marketing strategies, this data represents a roadmap to profitable growth in one of consumer lending’s largest segments.
The Bank Renaissance: Technology Meets Opportunity
Banks have returned as the largest lender type in auto financing, a remarkable shift that reflects both improved competitive positioning and strategic technology investments. This isn’t happening by accident—it’s the result of banks finally matching fintech speed with traditional banking trust and regulatory expertise.
The numbers tell a compelling story of precision targeting opportunities:
- Average new car loan credit scores increased 4 points year-over-year, with a 1 point increase for used car loans.
- Super Prime is the only risk tier seeing growth
- Over 83% of new loans are Prime+
For banks using automated prescreen technology, these trends create the perfect storm for acquisition success. The market is consolidating toward higher-quality borrowers—exactly the segment that responds best to financially personalized firm offers.
The Refinance Renaissance: A $71-Per-Month Opportunity
Perhaps the most striking finding in the Experian data is the explosive growth in auto refinancing. Refinance volume increased 11% from Q1 2025 and 29% from Q2 2020, with consumers saving over 2% on refinanced loan rates and average monthly savings of $47, increasing since 2024.
This aligns perfectly with our previous analysis showing that aggressive refinancing rates can increase prescreen loan offer volume by up to 40% by lowering rates by 75 basis points. When the average consumer is saving $71 per month through refinancing (as noted in the Q2 summary), the business case for automated prescreen refinance campaigns becomes undeniable.
Banks and Credit Unions using Micronotes’ Automated Prescreen technology are uniquely positioned to capitalize on this trend because:
- Speed Advantage: Average months to refinance has been decreasing since peak in Q4 2023 so, speed wins customers and members
- Data: Algorithms can identify the 29% of consumers most likely to benefit from refinancing from 230MM credit records, refreshed weekly, in hours
- Regulatory Compliance: FCRA-compliant firm offers eliminate compliance risk while maximizing conversion using AI to optimize behavioral economics
Credit Unions vs. Banks: The Market Share Battle
The data reveals an interesting competitive dynamic: Credit Unions have steadily increased their share of the refinance space and offer the largest payment difference. However, banks maintain the overall lending leadership position.
This creates a strategic opportunity for credit unions to leverage their pricing advantages through automated prescreen marketing.
The EV Opportunity: Misunderstood but Profitable
EV share of new purchases dropped below 9%, but this represents opportunity, not obstacle. The data shows EV lease rates are just under 58% with average payment difference of $175 between lease and loan.
Smart prescreen campaigns can target EV prospects with education about total cost of ownership advantages, lease-to-loan conversion opportunities, and refinancing options for existing EV loans. The lower market penetration means less competition and higher win rates for banks with sophisticated targeting capabilities.
Payment Inflation: The $1,000+ Challenge and Opportunity
Over 15% of all new payments (loan & lease combined) are over $1,000, highlighting the growing affordability challenge. However, this creates prime refinancing opportunities for banks with competitive rates.
Consider the implications for prescreen marketing:
- New Customer/Member Acquisition: Target high-payment auto loans held by competitors with the right behavioral economic strategy
- Existing Customer/Member Retention: Proactively offer refinancing before customers/membrers shop elsewhere
- Cross-Sell Opportunities: Connect auto refinancing with other debt consolidation products
Technology as the Great Equalizer: Lessons from the Lending Leaders
The most successful institutions in auto lending share common characteristics that directly align with automated prescreen capabilities:
Speed and Efficiency: With terms increasing across the market and loan amounts increasing both year-over-year and quarter-over-quarter, consumers need fast decisions on larger loans. Automated prescreen technology delivers instant pre-qualification that traditional multi-vendor prescreen marketing processes cannot match.
Risk Management: Delinquencies increase year-over-year and remain high, making precise risk assessment crucial. Automated prescreen campaigns can identify the Super Prime and Prime borrowers who represent 83% of the profitable market while avoiding higher-risk segments.
Market Intelligence: Post campaign analytics reveal how much of your prescreen list that took out an auto loan you won, and why — setting the stage for continuous optimization.
Strategic Recommendations: Winning the Auto Lending Future
Based on the Experian data and our experience with successful automated prescreen campaigns, banks and credit unions should implement these strategies immediately:
1. Strategic Refinance Targeting
Based on the 29% growth in refinance volume since 2020 and our research showing rate sensitivity can increase offer volume by 40%, launch targeted campaigns focusing on existing auto loans where you can offer meaningful savings. The proven consumer appetite for refinancing—combined with average monthly savings opportunities—justifies aggressive competitive positioning.
2. Super Prime Acquisition Focus
With Super Prime being the only growth segment, concentrate prescreen campaigns on 750+ FICO scores. These borrowers represent the lowest risk and highest lifetime value, justifying premium acquisition costs.
3. Technology-Enabled Speed
Match fintech speed with bank and credit union stability. Automated prescreen technology with instant pre-qualification gives you the speed advantage while maintaining compliance and risk management standards.
4. Cross-Product Integration
Use auto loan originations as gateway opportunities for broader banking relationships. Every auto loan customer represents potential mortgage, HELOC, and deposit opportunities though, those conversion are difficult and require a thoughtful relationship deepening strategy and the right technology.
The Competitive Imperative: Act Now or Fall Behind
The convergence of rising loan amounts, increasing refinance activity, and bank market leadership creates a once-in-a-generation opportunity for institutions ready to act decisively. Balance growth has slowed, but is up year-over-year—meaning the institutions capturing market share now will define the competitive landscape for years.
Banks and credit unions using Micronotes’ Automated Prescreen technology report:
- Higher conversion rates through precise targeting
- Net negative acquisition costs as loan income exceeds campaign costs
- Improved competitive positioning through optimization
The Q2 2025 data proves that auto lending success isn’t just about having capital—it’s about using technology and data to deploy that capital more intelligently than the competition.
Conclusion: From Market Follower to Market Leader
The auto lending market is undergoing fundamental transformation. Banks and credit unions that combine the trust and stability of traditional banking with the speed and precision of AI-powered prescreen marketing will capture disproportionate market share.
The Experian data shows banks are already winning. The question is: will your institution be among the leaders, or will you watch competitors capture the $71-per-month refinance opportunity and the 83% Prime+ market while your institution settles for whatever’s left?
The technology exists. The market opportunity is proven. The competitive advantage goes to institutions that act now—at scale and with precision—to help customers lower their borrowing costs while generating profitable loan growth.
Ready to transform Q2 2025’s auto lending insights into market-leading results? Connect with Micronotes today to discover how automated prescreen technology can turn industry trends into your competitive advantage.
