Online Buyers Take Traditional Approach to Car Financing
Despite the advice of many leading consumer advocates, most car buyers are not arranging their loans prior to getting an online price quote and fewer still are getting multiple quotes on their car financing, according to a new exclusive survey by BuyingAdvice.com.
The new study, combined with other recent research, shows that while new vehicle buyers are turning to the web to get competitive price quotes on vehicles in increasing numbers, they are much slower to change their approach to financing.
In response to a new BuyingAdvice.com survey, 1759 buyers who stated they were within a month of purchasing a new car were asked what steps they had taken to arrange car financing.
Just under 60 percent of respondents said that they had not arranged car financing before requesting their online price quote. The sample was taken from among the 50,000 users who request Internet price quote from BuyingAdvice.com each month and who agreed to participate in the study.
An earlier survey revealed that two-thirds of users were requesting online price quotes for the first time and that they believed that they would get a better deal by doing so.
The industry-backed group AWARE, Americans Well-informed on Automobile Retailing Economics, states that last year the majority of car financing was done at dealerships and it seems from our new study that, in this area at least, the behavior of those who get online price quotes follows a similar pattern.
Over 40 percent of those polled said that they would apply for car financing at the dealership. Most leading consumer advocates advise that it is best to arrive at the dealership with a loan offer in hand, at least to provide a basis for comparison and also to strengthen the buyer's negotiating position.
The goal of the finance office at the dealership is to get the customer to agree to the highest rate possible and maximize profit. By having a basis for comparison an informed consumer can negotiate down the rate at the dealership or go elsewhere for their financing, say experts. Without that information the buyer runs the risk of seriously overpaying for their loan and giving back the ground they have achieved by getting a competitive price on their vehicle.
Consumers also need to incorporate the length of the loan into the equation when making their comparisons, according to leading experts. The Consumers Bank Associate study of auto loans for 2006 shows the average length of car loans is getting longer which increases the amount of interest charged on the loan and the overall cost to consumers. A loan quote from a source other than the dealership may also be free of fees and other charges which can be used to inflate the cost of the loan.
Even AWARE advises comparing rates from multiple sources such as banks, credit unions and online lenders to establish the best interest rate you can achieve prior to visiting the dealership. AWARE also advocate establishing a price range you can afford and checking your credit score before going car shopping. As interest rate will go a long way to determine the overall price most consumers will pay for their vehicle, knowing what the lowest rate you can qualify for has a major impact on establishing your overall budget.
But our survey reveals that buyers are most likely to request car financing at the dealership after they determine a price for their vehicle. Only 40.14 percent of respondents said that they had already arranged financing and only 22.34 percent said they had requested multiple quotes.
In the highly competitive auto loan market, most financial experts advise making lenders compete for your business by seeking quotes from multiple sources.
As with other areas of the car market the Internet has changed the options available to the consumer. It is now possible to make applications and arrange car financing via the web, but our survey sample seems to indicate that consumers are unwilling to adopt this approach.
Only 15 percent of respondents said that they had looked on the web for quotes when looking for their loans.
It seems that even though consumers have accepted the idea that the Internet is a useful tool for research and lowering purchase price they have yet to embrace it as a method for requesting loans and even adventurous buyers go the traditional route when arranging their car financing.
Published on Tuesday, July 3, 2007 - Email to a friend
Copyright 2009 BuyingAdvice.com, INC. All rights reserved. This material may not be published, rewritten, or redistributed.
Find New Cars
SEARCH BY MANUFACTURER
