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Empowering Vehicle Access

Open Lending’s research reveals an ongoing vehicle affordability crisis with far-reaching implications. Deterred by steep prices and perceptions of an inequitable lending process, many Americans are foregoing vehicle ownership at significant cost to their livelihoods and daily lives. Non-car owners tell us their careers, health, personal lives and financial security are all suffering due to a lack of vehicle access. The takeaway is clear: Many non-car owners see the car buying process as unclear or confusing, and 83% said they would return to a lender for other purposes if they had a positive automotive loan experience. These findings validate lenders' opportunity to prove wrong the consumer perception across all credit segments that automobile loans aren't an accessible option for them.

Our research reveals a clear opportunity for lenders to expand the customer base they serve. By extending loan opportunities to all borrowers, especially near and non-prime borrowers, lenders can play a key role in empowering vehicle access across underserved segments of the population, while building customer loyalty and lifetime value.

For most car buyers, the process of owning a car involves finding a lender and getting approved for an auto loan. But in the view of those surveyed by Open Lending, this process is fraught with complexity and a lack of clarity. Among non-car owners, a mere 11% said they perceived the car-buying process as “extremely transparent.” By contrast, over one-third of non-owners (35%) said they viewed the process as either “mostly” or “extremely opaque.” The perception of an opaque process is particularly pronounced among individuals with lower FICO credit scores. Within the 501-600 range, for instance, a full 40% characterize the lending process as lacking transparency, while 36% of those in the 601-660 range feel the same. Perhaps because they see transparency in the lending process, the vast majority (83%) of non-car owners said they’d be repeat customers with a lender they perceived as fair and straightforward — and would even forego comparing options when it came to larger purchases, such as a house.

Are complexities in the lending process holding prospective buyers back?

Car-Buying Complexity

“When you imagine the experience of buying a car — including applying for a loan, etc. — how transparent of a process do you expect it will be?”

Chart 5.1

Chief Title Officer

John Smith

We have seen many lenders over the years try to serve the near and non-prime consumers only to fall short. Often these lenders will place stipulations or conditions on the loan, limiting the consumer’s ability to accept the loan as approved. Ultimately, the consumer ends up at a dealership and presents their desired monthly payment only to be backed into a loan that is the most profitable for the dealership, regardless of the best rate for the consumer. This process — which tends to disproportionately impact those with lower credit scores — is both opaque and inequitable. Banks and credit unions have an opportunity to better serve near- and non-prime consumers by enhancing their lending processes and building out more sophisticated interest-rate pricing models that allow for better approvals. Doing this isn’t only more equitable; it also increases customer lifetime value, fueling return customers for other major life purchases.

MATT'S TAKE

Between traveling to health care appointments, going shopping, attending social gatherings and supporting a family, there’s virtually no aspect of daily life that isn’t impacted by a lack of vehicle access. For lenders, these findings illustrate the transformative power of more accessible auto loans. By taking steps to put auto loans within reach for more Americans, lenders can improve the quality of life and livelihoods across underserved populations. And it’s good for business too: by using industry-leading risk management solutions that include default insurance coverage, lenders can expand their portfolio to near- and non-prime buyers while controlling for risk — leading to higher yields and more loyal repeat customers.

MATT'S TAKE

Non-car owners also reported numerous personal and professional inconveniences and hardships. For instance, 60% of non-car owners said essential tasks and errands are more challenging without a car, while nearly half (48%) said that not having a car makes it difficult to spend time with family and friends. Among Gen Z, one-third (31%) reported a lack of a car makes continuing their education harder, while about one-quarter (24%) of millennials said it complicates childcare.

“Which of the following tasks and responsibilities do you feel are more challenging because you don’t own a car?"

Chart 4.1

Not owning a car causes far-reaching inconveniences and hardships

Equitable Opportunities

“I wouldn’t have to have my daughter’s dad drop her off every weekend. Instead, I could do it myself.”

“It would greatly improve my earning opportunities.”

“I would be able to help out my parents more, not having to rely on public transportation.”

“It would open a lot of opportunities for me, financial and social.”

Opportunity

Car ownership means

“I’d be able to handle everything myself, and I’d save a lot of money.”

“It would provide extra income and time to do more family activities.”

“It would make going to appointments and work easier so I don’t have to work around other people’s schedules.”

“I could see my family more often, instead of relying on them to pick me up.”

“I would not feel so stranded and isolated.”

“I would feel free.”

“I wouldn’t have to rely on anyone.”

“I’d have the freedom to go places.”

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To better understand the significance of vehicle ownership, we asked non-car owners a simple question: “In your own words, how would vehicle ownership most change your life?” Exploring the hundreds of open-ended responses, several themes emerged that illustrate what a transformative role non-car owners believe a vehicle could play in shaping their lives.

In your own words, how would vehicle ownership most change your life?”

“

Respondents cite flexibility, financial gains and independence as life-changing benefits of car ownership

Ownership’s Impact

When it comes to the workforce, a majority of non-car owners feel they’d perform better in their current job — and be able to increase their earning potential — if they owned a car. As our survey found, 62% of non-car owners stated that vehicle ownership would improve their ability to perform their current job, while 64% felt their earning potential would increase with access to a vehicle. Non-car owners also reported lower overall job satisfaction (66%) than their car owner counterparts (78%). For most non-vehicle owners, missing out on career advancement isn’t just a gut feeling — it’s something they’ve experienced firsthand. Our survey showed that 55% of non-car owners have had to turn down a better job or promotion due to not owning a car. Exploring this data point further, we found that lower-income individuals were more likely to report missed career opportunities than their higher-earning counterparts, with those earning less than $50,000 reporting the most missed opportunities.

Chief Title Officer

John Smith

The Great Recession of 2008-2009 forced many people to choose between paying their home loan or car loan. Most chose paying for their car first. As we face another potential recession, that trend will be interesting to watch. And if there’s a significant job market contraction, individuals without vehicle access could be placed at an even greater disadvantage when it comes to securing new roles or keeping the jobs they have.

MATT'S TAKE

Non-car owners say a lack of vehicle access is holding them back at work

A Professional Toll

of non-car owners have had to turn down a better job or promotion due to not owning a car.

55%

of non-car owners felt their earning potential would increase with access to a vehicle.

64%

Chief Title Officer

John Smith

Looking ahead to 2023, we’re going to continue to see a drop in the price of vehicles, as supply increases and chip issues are resolved. But we’re unlikely to experience a return to pre-pandemic pricing, since car manufacturers and dealers won’t be able to regain the level of supply or number of units on the lot that they had prior to the pandemic. For consumers, especially those in near- and non-prime categories, this means continued affordability issues — unless lenders take concrete steps to lower the barrier to entry.

MATT'S TAKE

Among non-car owners surveyed by Open Lending, nearly half (48%) indicated that a lack of affordability is the primary reason they don’t own a car — notably ahead of other factors like living in public-transit-heavy regions or not needing a car for their lifestyle. This finding is somewhat expected, given inflated vehicle prices. The average used car, for instance, currently sells for 42% more than pre-pandemic figures. What’s more surprising, however, is that vehicle affordability is a widely cited issue across income levels. While affordability concerns are most pronounced in the income brackets that meet HHS Poverty Guidelines for 2022, it’s also a notable factor for those in higher income brackets. Generationally, younger people are feeling the affordability problem more acutely, with 52% of Gen Zers (ages 18-25) and 50% of millennials (ages 26-41) saying they can’t afford a car.

Respondents for whom affordability is the no. 1 reason they don’t own a car, segmented by income

Chart 1.1

Across income levels, car affordability is keeping people from purchasing

The Cost Question

In September 2022, Open Lending conducted a survey of 1,347 U.S.-based employees, including 750 non-car owners and 597 car owners. The goal of the survey was to better understand public sentiment around vehicle ownership while exploring how this issue relates to career advancement and financial security.

We’ve grouped our survey results into the five most striking themes that emerged from our data analysis. With each theme, we’ve included visualizations that illustrate our findings while offering commentary about what they suggest for the future of vehicle ownership — and the role lenders can play in expanding vehicle access.

In this report, Open Lending answers these questions.

And what role can financial institutions play in expanding vehicle access?

How does a lack of a vehicle impact daily life?

What does it mean to have access to a vehicle?

Driving Opportunity: U.S. Vehicle Accessibility Index 2023

“Have you ever had to turn down a better job opportunity or promotion due to not owning a car?” Segmented by income

Chart 2.4

“Overall, how satisfied are you with your current job?”

Chart 2.3

“To what extent would you say a lack of car ownership negatively impacts your earning potential?”

Chart 2.2

“To what extent would car ownership improve your ability to perform your current job more effectively and conveniently?”

Chart 2.1

Many non-car owners see the car buying process as unclear or confusing, and 83% said they would return to a lender for other purposes if they had a positive automotive loan experience.

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 by saying “yes” to more automotive loans.

Methodology:

Approach:

Between rising vehicle costs, the return to physical workplaces and a growing move away from urban hubs with public transportation, the question of vehicle access comes into stark focus. But what’s keeping people from buying vehicles? Is it just affordability, or are other factors at play, such as negative perceptions of the lending process? For those who don’t have vehicles, how does this impact job performance, earning potential and daily life? And how can lenders better reach non-vehicle owners — especially those in lower credit score segments — while limiting risk and driving profitability?

Matt has been with Open Lending since 2007, working across marketing, implementation, operations, finance and IT systems divisions. He'll provide commentary and insights on each of the report's five sections.

Chief Revenue Officer Open Lending

Matt Roe

Your Guide:

Independence

Car ownership means

Flexibility

Car ownership means

(Click the interactive chart for more info)

(Hover over the interactive chart for more info)

*Due to rounding, some totals may not correspond with the sum of the separate figures.

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