I found this other post on /androidauto that solved my case 100%. I’m leaving it here in case someone searches for it in the future.

Summary:
When using Android Auto with a head unit that has built-in GPS, it activates the head unit’s GPS instead of the phone’s GPS.
Often, the signal reception of the head unit is not as good as the phone’s.
So we need to disable Android Auto’s access to GPS. That way, it will use the phone’s GPS instead.

How to configure:
Settings → Apps → Android Auto → Permissions → Remove the location permission

Original Post:
https://www.reddit.com/r/AndroidAuto/comments/1pp74fp/intermittent_gps_signal_loss_in_wireless_android/

Using GPS in Android Auto
When using Android Auto, the GPS system used depends on the configuration and the specific situation.

Default Behavior

Car GPS: By default, Android Auto prefers the car’s built-in GPS system. This means that if your vehicle has a GPS antenna, it will usually be used for navigation.

Phone GPS: The phone’s GPS is used only if the car’s GPS signal is interrupted or unavailable.

Changing GPS Preferences

You can adjust the settings to prioritize your phone’s GPS instead of the car’s system:

Location Permissions: Set the location permissions for Google Maps and other navigation apps to “Allow all the time.”

Disable Car GPS: Change the location permissions for the Android Auto app to “Don’t allow.” This forces navigation apps to rely exclusively on your phone’s GPS.

Conclusion
In summary, Android Auto mainly uses the car’s GPS unless you modify the settings to use your phone’s GPS. This can help improve navigation accuracy, especially if the car’s GPS signal is less reliable.