On Thursday, Open Lending Corp. released a Near- and Non-Prime Consumer Brief, the latest installment in its quarterly series of data reports on vehicle registrations.

Despite continued challenges in the vehicle market, the report highlighted new-vehicle registrations have risen and used-vehicle registrations have stabilized in the past year, though supply remains below pre-COVID levels.

Analysts said limited used-vehicle inventory and high interest rates continue to impact buyers, creating pent-up demand among near- and non-prime consumers.

Using AutoCreditInsight data from Q2, the report offers insight into the opportunity for auto finance companies 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.

Other key findings from Open Lending include:

The near- and non-prime new vehicle market is improving, while the used vehicle market continues to stabilize.

In Q2, new-vehicle registrations among near- and non-prime consumers rose by 1% year-over-year and 7% compared to Q1. Used-vehicle registrations dropped to 95% of last year’s level and fell 5% from Q1, reflecting ongoing supply and pricing challenges.

New-vehicle payments are rising where used-vehicle payments are starting to fall.

The average monthly payment for new vehicle loans increased $10 year-over-year in the second quarter of 2024, compared to a $10 decrease for used vehicle monthly payments during the same period.

Compact utility vehicles continue to be the top choice for near- and non-prime borrowers, but other segments are gaining popularity.

Subcompact utility plus vehicles accounted for 13% of new vehicles purchased by near- and non-prime consumers in Q2, compared to just 5% in Q2 2020. Meanwhile, fewer borrowers purchased new, full-size half-ton pick-up trucks, indicating a shift towards more affordable and fuel-efficient vehicles.

“While the automotive market continues to show signs of recovery, the cost of a vehicle is still a strain for many near- and non-prime credit buyers who rely on used vehicle inventory, which continues to sit below pre-COVID levels. But pent-up demand now could mean better used vehicle options in 2025, as decreasing interest rates prompt buyers to sell or trade in their current vehicles,” said Kevin Filan, senior vice president of marketing at Open Lending.

“For automotive lenders, these shifting dynamics signal an opportunity to forge new borrower relationships and help near- and non-prime consumers access the vehicles they need,” continued Filan, who is among the experts set to appear during Used Car Week, which begins on Monday in Scottsdale, Ariz.

“With Lending Enablement Solutions like our Lenders Protection, lenders can engage responsibly with these consumers, helping them achieve car ownership in a market that hasn’t fully adapted to their needs,” he went on to say.

The full report is available here.