Near- and Non-Prime Consumers Continue to Face Barriers in the New and Used Vehicle Markets, Open Lending Research Finds

Rhea-AI Summary

Open Lending (NASDAQ: LPRO) has released its quarterly Near- and Non-Prime Consumer Update for Q1 2024, focusing on automotive lending trends. Key findings reveal that near- and non-prime consumers continue to face challenges in the vehicle market, particularly in the used sector. While prime and super-prime borrowers saw increases in vehicle registrations, near- and non-prime borrowers experienced a 6% decrease in used vehicle registrations and only a 1% increase for new vehicles.

The report highlights regional disparities in vehicle affordability, with used vehicle prices up 6% in the Southeast and new vehicle prices up 5% in the West. The Honda Civic and Ford F-Series remain the top-registered new and used vehicles, respectively, among near- and non-prime borrowers. Open Lending emphasizes the opportunity for lenders to serve this vital consumer segment using alternative data, advanced risk analysis, and default insurance.

Positive

• Release of quarterly data report on near- and non-prime automotive lending trends, providing valuable market insights
• Opportunity for auto lenders to serve near- and non-prime consumers, potentially leading to member growth and higher yields

Negative

• 6% decrease in used vehicle registrations among near- and non-prime borrowers
• Challenges for near- and non-prime consumers due to tightening credit availability, high interest rates, and vehicle prices
• Regional disparities in vehicle affordability, potentially impacting market reach

Market Research Analyst

The report highlights persistent challenges for near- and non-prime consumers in the automotive market, which could impact lenders and automakers. Key points include:

• Vehicle registrations for near- and non-prime borrowers decreased by 6% for used vehicles and increased only 1% for new vehicles, compared to higher growth rates for prime borrowers.
• Regional disparities in vehicle affordability, with used vehicle prices up 6% in the Southeast and new vehicle prices up 5% in the West.
• Continued preference for Honda Civic (new) and Ford F-Series (used) among near- and non-prime borrowers.

These trends suggest a potential slowdown in sales to this consumer segment, which could affect automotive lenders and manufacturers. Lenders may need to innovate their risk assessment methods to tap into this market effectively while managing default risks.

Financial Analyst

The report's findings have implications for the automotive finance sector and related industries:

• Tightening credit availability and high interest rates are constraining near- and non-prime borrowers, potentially reducing loan volumes for lenders focused on this segment.
• The disparity in vehicle registration growth between prime and near-/non-prime borrowers suggests a widening gap in market access, which could lead to increased demand for alternative financing options.
• Regional price variations indicate opportunities for targeted lending strategies in different geographical areas.

Lenders and fintech companies offering innovative risk assessment tools, like Open Lending, may see increased demand as traditional lenders struggle to serve this market segment profitably.

Automotive Industry Expert

The report reveals significant trends affecting the automotive industry:

• The used vehicle market is particularly challenging for near- and non-prime consumers, which could lead to extended vehicle ownership cycles and impact the overall market dynamics.
• Regional price disparities suggest supply chain issues may still be affecting certain areas more than others, potentially influencing manufacturer distribution strategies.
• Continued popularity of specific models (Honda Civic, Ford F-Series) among near- and non-prime borrowers indicates strong brand loyalty and could inform marketing and production decisions.

Automakers and dealers may need to adapt their strategies to address affordability concerns and maintain sales volumes in the near- and non-prime segments, possibly through enhanced certified pre-owned programs or flexible financing options.

Lending enablement provider releases quarterly data report on near- and non-prime automotive lending trends, regional vehicle preferences

AUSTIN, Texas--(BUSINESS WIRE)-- Open Lending Corporation (NASDAQ: LPRO) (“Open Lending” or the “Company”), an industry trailblazer in automotive lending enablement and risk analytics solutions for financial institutions, today released a new Near- and Non-Prime Consumer Update, continuing its quarterly report series on automotive lending trends among near- and non-prime consumers. The report covers vehicle sales volume, interest rates, payment trends and consumer preferences in the first quarter of 2024. In addition to national data, this research offers findings on regional near- and non-prime automotive lending.

Using AutoCreditInsight^TM data, the report offers insight into the opportunity for auto lenders to serve near- and non-prime consumers, a vital audience segment for financial institutions seeking member growth and greater yields in their auto lending portfolio. Key findings include the following:

• In the used vehicle market, low inventory and high prices are disproportionately impacting near- and non-prime borrowers nationwide. In the first quarter of 2024, vehicle registrations among prime and super-prime borrowers increased by 3% for used and 7% for new compared to the first quarter of 2023. Meanwhile, vehicle registrations among near- and non-prime borrowers decreased by 6% for used and climbed just 1% for new.
• Near- and non-prime borrowers are also facing regional differences in vehicle affordability. Average used vehicle prices are up 6% in Southeast, and average new vehicle prices are up 5% in the West, while the rest of the country has remained relatively flat for new and used.
• The Honda Civic remains the top-registered new vehicle and Ford F-Series the top-registered used vehicle among near- and non-prime borrowers.

“Although the automotive market shows signs of stabilizing, near- and non-prime consumers remain challenged in the used vehicle market. This is due to tightening availability of credit, persistently high interest rates and vehicle prices, and increased ownership and insurance costs,” said Kevin Filan, SVP of marketing at Open Lending. “Regardless of credit score, most Americans need reliable vehicles to access good jobs, care for their families, and climb the credit ladder. The automotive lenders who use alternative data, advanced risk analysis and default insurance are better equipped to identify the reliable, underserved near- and non-prime borrowers who will happily exchange their loyalty for more personalized loan pricing.”

For more insights, access the full report.

Methodology

Data was sourced from AutoCreditInsight™, a business intelligence tool developed by TransUnion in partnership with S&P Global Mobility, looking at newly registered vehicles in the new and used categories through the first quarter of 2024. Registrations that did not have a VantageScore®4.0 associated with the record were excluded. Open Lending defines near- and non-prime as a VantageScore®4.0 in the 560 to 699 credit range and prime and above as a VantageScore®4.0 greater than or equal to 700.

About Open Lending

Open Lending (NASDAQ: LPRO) provides loan analytics, risk-based pricing, risk modeling, and default insurance to auto lenders throughout the United States. For over 20 years, we have been empowering financial institutions to create profitable auto loan portfolios with less risk and more reward. For more information, please visit www.openlending.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240827732711/en/

Media Inquiries

press@openlending.com

Investor Relations Inquiries

openlending@icrinc.com

Source: Open Lending Corporation

FAQ

What were the key findings of Open Lending's Q1 2024 Near- and Non-Prime Consumer Update for LPRO?

The report found that near- and non-prime consumers face ongoing challenges in the vehicle market, with a 6% decrease in used vehicle registrations and only a 1% increase for new vehicles among this group. Regional disparities in vehicle affordability were also noted, with used vehicle prices up 6% in the Southeast and new vehicle prices up 5% in the West.

How did vehicle registrations for prime and super-prime borrowers compare to near- and non-prime borrowers in Q1 2024 for LPRO?

Vehicle registrations for prime and super-prime borrowers increased by 3% for used and 7% for new vehicles compared to Q1 2023. In contrast, near- and non-prime borrowers saw a 6% decrease for used vehicles and only a 1% increase for new vehicles.

What were the top-registered vehicles among near- and non-prime borrowers according to Open Lending's LPRO report?

The Honda Civic remained the top-registered new vehicle, while the Ford F-Series was the top-registered used vehicle among near- and non-prime borrowers in Q1 2024.

How can automotive lenders better serve near- and non-prime consumers according to Open Lending (LPRO)?

Open Lending suggests that automotive lenders can better serve near- and non-prime consumers by using alternative data, advanced risk analysis, and default insurance. This approach can help identify reliable, underserved borrowers and offer more personalized loan pricing.