New study finds real difference between dealership finance and bank loans
What kind of car buyer are you? A new study shows the type of car finance you choose will directly affect the vehicle buying process.
An investigation conducted by financial researchers RFI Group shows the key factors that influence which type of lender a car buyer will approach.
Most popular car financing options
Source: RFI Group
Car dealerships make financing “exciting” and offer the perception of greater customer negotiation power
RFI Group analysts discovered that buyers who applied for financing through the car dealership put their focus primarily on the car first; money came second and was only considered later in the purchasing process.
The researchers described this approach as often “fast and rushed” with dealers making in-house financing “easy and exciting”.
Additionally, those looking for a new car have the perception that a car salesperson will be able to negotiate and haggle the finer details of financing and the car itself. The statistics pointed to dealership buyers having the ability to spec-up their model, hammer out the finer points of their loan (including interest rates and terms) and carry greater negotiating leverage with a car trade-in.
Car dealers prove highly persuasive
Surprisingly, 14% of dealership customers had not conducted any research into car loans and they just focused on getting the car. Car dealers also benefit from having a physical forecourt; 44% of buyers happened upon the business as they drove past, rather than conducting any specific research.
Over half (56%) of those looking to buy a vehicle originally intended on seeking out financing from a bank and only 30% were open to dealer-arranged loans. But once they visit the dealership, the salespeople do their job and the figures do a flip. RFI Group report suggested this shows the power of having a sales representative on hand and the power of being able to drive and experience a car. The RFI Group also suggested that being able to set-up a credit agreement and leave with a new car all within a couple of hours could also have an effect.
Why car buyers deal directly with a finance lender or bank
Compared with buyers who visited the dealership, those who arranged credit through a bank or lender were far more budget aware. The car itself takes a slightly lower priority and this group also spends more time examining different loan products. Bank customers don’t negotiate on loan terms and interest rates, mainly because there’s less opportunity to do so.
Bank customers desire pre-approval
For direct-with-bank customers, the primary deciding factor was a desire to be pre-approved for finance before going car shopping. They are increasingly likely to hold the belief that bank financing is a more accessible route to go down. The RFI Group says a bank “already has their details and the personal banker knows their situation”.
The report also disclosed that, due to a lack of confidence visiting a car showroom, over half of consumers under 25 arrange car finance through a bank or lender. Younger motorists were also more likely to buy from independent sellers.
Compare cars and finance without the pressure
Car salespeople are notoriously committed to getting you to purchase a car. After all, it’s their job. Banks and financing companies can offer some great financing deals for vehicles, but then you need to do some legwork and study up on your next car.
Here at finder, we can help with the car purchasing process. First, you can save time by reading our comparison car reviews. We combine several expert reviews into one. We also publish specific car financing information from manufacturers.
Once you’ve decided upon your next car, you can compare car financing using our handy tool. You’ll also find a car loan calculator to discover how much a loan will really cost and learn more about the car loan approval process.
- Lending Express is making quick work of getting a business loan
- Easter break is no holiday for SMEs
- The experiment that led OnDeck to launch in Australia in 2015: “We saw a real problem”
- Ask Finder: What happens to Emirates during the Southern Runway closure?
- Money Hack: Save money on car hire this Easter with GoGet