Car Shoppers Want Financing Early On, Survey Indicates

Most modern car shoppers prefer to start the financing process online early in the shopping journey and before they go to a dealership.

That’s according to a consumer-sentiment poll by CarGurus, an online marketplace to buy and sell vehicles.

It’s a sign of the digital times that stands in contrast to previous times when the standard drill was for customers to select a vehicle at the dealership, then arrange the financing terms.

In the past, figuring out the financing before vehicle selection mainly was limited to subprime customers with limited options because of their low credit rating.

Using digital tools to prequalify consumers (with finalizing the terms and signing the paperwork taking place at the dealership) is a win-win for both customers and dealers, says Madison Gross, CarGurus’ director-customer insights.

“We see prequalified leads as 60% more likely to purchase – and it takes less time,” she tells WardsAuto.

The study sheds new light on car shoppers’ perceptions of vehicle financing, including how it affects the overall cost of a vehicle purchase.

“Monthly payments and interest rates are the top factors as to what matters most,” including in many cases the vehicle price, Gross (pictured below, left) says of the survey findings. Only 18% consider the total price paid as the most important. 

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But only 50% of them availed themselves of the option. Many of those consumers feared the online prequalifying steps would just be repeated at the dealership, Gross says.  

CarGurus’ loan prequalification digital tool asks users the price of the vehicle they are interested in, the amount of their down payment and the desired length of the loan. A “soft” credit check is done to determine credit scoring. The consumer then can car shop with personalized rates offered by three partner lenders. Such tools go much deeper than mere payment calculators on automotive websites.

Nearly 70% of the 754 consumers polled for the survey said they thought getting a prequalified loan would help them feel more confident and prepared to talk to dealers about financing

More than 65% found value in prequalification because they wanted to complete more of the shopping process before visiting the dealership.  

“Our research found that consumers are eager to purchase a vehicle in a similar fashion to buying a home, and they want to know more about financing for this major purchase in advance instead of treating it as an afterthought,” says Gross.

“According to the study, there is also a lot of room to educate consumers on the general ideas around automotive finance, which should ultimately provide a better shopping experience for both consumers and dealerships.” 

The No.1 pain point shoppers listed when it came to auto financing was a fear of rates not being “real,” or changing, Gross says. Forty-two percent of shoppers wish they could see their monthly payment and other loan terms during the online shopping phase.

CarGurus says one of the study’s key takeaways is the need to ease ready-to-buy shoppers’ fears by offering more rate transparency early in the shopping process. 

Many surveyed shoppers said the so-called F&I “box,” where in-store financing occurs, remains a dreaded part of the traditional car-buying process. Top concerns include fear the dealer’s terms won’t be fair (37%), worry the process will take too long (34%) and difficulty in understanding loan terms (25%).

Almost half (42%) of recent purchasers report spending more than an hour discussing financing at the dealership.

Two-thirds of them saw value in handling more of the car-shopping process before the dealership visit.   

CarGurus says the key takeaway there is for dealerships to save time for both staffers and shoppers by providing more financing resources online, identifying pre-qualified leads that enter the store’s customer-relationship-management system and preparing customer information in advance of their dealership arrival.

Steve Finlay is a retired WardsAuto senior editor. He can be reached at [email protected].