Competition heats up for underserved consumers in auto

Competition is increasing for auto lenders who serve consumers with thin credit or who don’t qualify for traditional credit. Financiers’ interest in serving consumers who don’t have consistent access to traditional credit or face barriers in obtaining financing has risen alongside the size of that market, with more than 90 million adults in the United States estimated to fall outside of credit profiles served by traditional lenders, Andrew Rostami , chief product and marketing officer at Credit Acceptance Corp. (CAC), told Auto Finance News . Southfield, Mich.-based CAC serves consumers with limited or no credit history and nonprime consumers who do not fit the criteria of mainstream financiers. While CAC does not publicly disclose specific growth targets, Rostami said the lender is focused on “strengthening the fundamentals required to responsibly serve underserved consumers at scale.” CAC’s adjusted portfolio rose 0.6% year over year to $9 billion in the fourth quarter of 2025, despite a 9.1% YoY decline in consumer originations to 71,731 units. ‘Large, durable segment’ Underserved markets, Rostami said, include: Consumers with subprime or thin credit files; Customers with newly formed credit; Individuals who have experienced life events that disrupted their credit history; and People with nontraditional or variable income, such as gig economy or self-employed workers. “This remains a large and durable segment of the U.S. market, and one we believe continues to be structurally underserved by traditional financing models,” Rostami said. In fact, an Equifax study released in February found that financing inclusion and targeting underserved populations was a top opportunity for growth in 2026 for leaders across an array of industries, followed by digital natives. The study analyzed responses from more than 100 market experts on consumer expectation shifts and operational challenges in the year ahead. [caption id="attachment_58360276" align="aligncenter" width="2560"] (Chart/Auto Finance news | Source: Equifax Insights)[/caption] [caption id="attachment_58359007" align="alignright" width="200"] (ChatGPT/AI-generated)[/caption] The K-shaped economy is contributing to a divergence in the financial health of American consumers in terms of wealth, debt levels and assets, David Sojka , a senior adviser at Equifax, told AFN . “The upper part of the K [are consumers] that are benefiting from a stock equities market that has been rising for the better part of a year,” he said. “The bottom part of the K [are] those that ... are struggling and needing to take an additional job.” Use of alternative data While most lending decisions start with a credit file, financiers are turning to alternative data when necessary and may use AI or machine learning to come up with a credit score for the applicant, Sojka said. “That's becoming more prevalent as more lenders feel comfortable asking for the information,” he said, citing utility payment, payday and lease-to-own information as examples of alternative data. “The consumer feels more comfortable to say, ‘I really want to buy this car. The information that's available is not enough. It might be in my interest to [share data].’” "The consumer feels more comfortable to say, ‘I really want to buy this car. The information that's available is not enough. It might be in my interest to [share data].’” -- David Sojka, Equifax In fact, one in three Americans, or 33%, are classified as having thin or no credit, according to Equifax data published in 2025. AI-driven lender Lendbuzz , for one, has served nontraditional credit consumers since it was founded in 2015 and has expanded into near prime consumers, co-founder and Chief Executive Amitay Kalmar told AFN . The Boston-based financier, he noted, also lends to consumers who are gig workers or who otherwise do not have a traditional wage and tax statement from employment. “We developed algorithms to be able to underwrite consumers using cash flow,” he said. “We are seeing that gap in the market remains [but] there are more lenders that are focused on [underserved populations] and are able to serve that customer. It comes down to better terms, better rates, as well as speed of approval and speed of funding .” Lendbuzz projects a 20% year-over-year jump in originations in 2026, Kalmar previously told AFN . The lender’s focus, he said, “remains on cash flow-based underwriting and finding consumers that, within this challenging market, have both the ability to pay and willingness to pay.” Auto Finance News will present multiple invaluable events for industry professionals in 2026, starting with Auto Finance Summit East and Auto Finance Capital Summit in May. To see event agendas and register, visit autofinance.live .

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Competition heats up for underserved consumers in auto

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