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There’s more to borrowing potential than credit scores, says Open Lending’s Kevin Filan.

Driving Away Profits

Near- and non-prime consumers are still shut out of car buying.

As dealers struggle to raise profits, near- and non-prime consumers continue to be shut out of the retail vehicle market, according to Open Lending’s latest report.

That’s true even though access to auto credit improved in March across all channels and lender types compared to February, according to the Dealertrack Credit Availability Index. Subprime share of loans increased, and approval rates increased, which were moves that showed improvement for consumers. Still, credit remains tighter than a year ago, effectively forcing some non-prime consumers out of the market, reports Dealertrack.

That causes missed opportunities. As we’ve previously reported, alternative data can prove near- and on-prime consumers creditworthy.

“That traditional score should be the start of assessing the application, not the end,” Kevin Filan, Open Lending’s senior vice president of marketing, tells WardsAuto. “Dealers who partner with automotive lenders that utilize flexible, data-driven programs can get a wider spectrum of high-yielding loans and offer accessible vehicle ownership to deserving but often overlooked near- and non-prime borrowers."

Below are some of the points in this recent Open Lending report. Data was sourced from S&P Global’s AutoCreditInsight.

  • Used near- and non-prime registrations are down by double digits year over year. Near- and non-prime registrations declined 10% in 2023, while prime and super-prime stayed flat.
  • Vehicle prices may be starting to dip, but monthly payments are not. While the average vehicle price fell year-over-year in Q4 2023, the average monthly payment rose, with near- and non-prime consumers taking on a larger payment hike than prime and super-prime consumers.
  • Electric vehicles may be starting to become accessible to consumers outside of prime. New near- and non-prime EV registrations grew 161% and used EV registrations saw almost 100% growth year-over-year in the fourth quarter.

Many industry insiders had hoped credit relief would come from the Fed in the form of interest rate reductions, reports Jonathan Gregory, senior manager, economic and industry insights, at Cox Automotive.

Although interest rates aren’t currently increasing vehicle prices, borrowing costs and total costs of ownership remain at levels well above historical trends, he says.



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