CarGurus Study: Car Shoppers Want Honesty And Education In Finance Process

Trust, transparency and knowledge—three things auto shoppers responding to a survey on financing said were their biggest concerns. In addition, the survey conducted by car buying and research website CarGurus

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, revealed shoppers enjoy being able to research and arrange financing online, but they want more information available during their searches.

Regarding trust and transparency, according to the survey of 754 car shoppers taken last November, the leading concern is fear of rates they’re quoted online not being “real” or that they’ll change once it’s time to make a commitment.

When asked “Which of the following would you be concerned about when it comes to pre-qualifying for auto financing before going to the dealership?” 45.8% responded “the rates aren’t final.” The second most cited concern was “would have to do it again at the dealership anyways” chosen by 40.5% of respondents.

Despite those concerns 93% agreed the ability to pre-qualify for a vehicle lone online is “useful” although only two-thirds knew it was even an option.

The CarGurus survey also revealed a degree of dread surrounding the process of arranging vehicle financing. A little over a third (37%) said the were concerned the dealer’s terms would not be fair, 34% feared the process will take too long, a quarter said they were concerned about having difficulty understanding loan terms and 42% of recent purchasers reported spending over an hour discussing financing for their auto purchase at the dealership.

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

Indeed, the study showed that while consumers are anxious to complete more of the vehicle financing process online, they are thirsting for more knowledge about interest rates and options.

Tops of shoppers’ wish list is knowing what their monthly nut will be with 42% responding they’d like to see their monthly payment estimates while shopping for a car online before visiting a dealership. In that same vein, a fair number of respondents, 40.1%, reported they felt only “somewhat prepared” when they arrived at the dealership to discuss financing.

In the realm of education, the survey revealed some misconceptions about how a dealership makes its money. When asked to choose their top two responses to the question, “what aspect of the purchase do you think dealers earn the most profit, on average?” 44.7% chose “price of the car” with “repairs/warranties” the second most popular response at 33%.

However, according to the National Automobile Dealers Association 49.6% of a dealership’s gross profits comes from its service and parts department.

The respondents did do pretty well in a sort of one question quiz posing the hypothetical situation of purchasing a $25,000 vehicle with a $5,000 down payment, leaving them to finance the remaining $20,000. They were asked to choose which factors they’d expect to have the greatest impact on their monthly payments.

Almost half, 46.4% chose “Whether the interest rate is 5% or 8%, while 29.3% thought lengthening the term of the loan from five to six years would have the most impact on their monthly payments. Less than a quarter, 24.3%, chose “whether the down payment is $5,000 or $0.”

According to credit rating company Credit Karma, the three most important factors in determining monthly payment are: loan amount, the interest rate and the loan term with the amount of down payment being helpful in lowering the monthly obligation.

In a blog post aimed at dealers, CarGurus advises the results of the study means “As the retail environment returns to a more normal state, consumers’ increasing preference for online financing resources and tools is a key area within digital retail where you can help facilitate a more seamless online to in-store experience that benefits both your staff and your shoppers alike.”