Near- and Non-Prime Consumers Turn to Used Vehicles Amidst New Vehicle Payment Surge

The automotive market is witnessing a significant shift as near- and non-prime consumers, facing a 56% jump in new vehicle payments, are increasingly turning to the used vehicle market for more affordable options. According to a recent report by Open Lending Corporation, this trend is driven by regional differences in vehicle affordability and availability, as well as the desire for status and peer emulation.



Regional disparities in vehicle affordability and availability significantly impact the purchasing decisions of near- and non-prime consumers. In the Southeast, average used vehicle prices have increased by 6%, while in the West, average new vehicle prices have risen by 5%. Meanwhile, the rest of the country has remained relatively flat for new and used vehicles (Open Lending, 2024). These regional differences make it challenging for near- and non-prime consumers to afford new vehicles, pushing them towards the used vehicle market.

The increased demand for used vehicles, coupled with a lack of supply due to factors like the end of lease returns and reduced new vehicle production, could lead to a tighter inventory in the used vehicle market. This, in turn, could drive up used vehicle prices, making it even more challenging for near- and non-prime consumers to afford them. Additionally, larger vehicle purchases financed by auto loans can lead to worse loan performance and credit standing for non-prime consumers, exacerbating their financial situation (Di & Su, 2024).

Auto lenders can cater to these regional disparities by employing alternative data, advanced risk analysis, and default insurance. By using these tools, lenders can better identify reliable, underserved near- and non-prime borrowers who are willing to exchange their loyalty for more personalized loan pricing (Kevin Filan, SVP of marketing at Open Lending, 2024). Moreover, auto lenders can offer tailored financing solutions that cater to the specific needs and constraints of near- and non-prime consumers in different regions, making vehicles more affordable for these consumers.

In conclusion, the 56% jump in new vehicle payments has led near- and non-prime consumers to consider purchasing used vehicles instead of new ones. Regional differences in vehicle affordability and availability, as well as the desire for status and peer emulation, drive this trend. Auto lenders can tap into this opportunity by offering tailored financing solutions and using alternative data, advanced risk analysis, and default insurance to better serve these consumers. As the used vehicle market continues to grow, it is essential for auto lenders to adapt their strategies to cater to the evolving needs of near- and non-prime consumers.