Consumers Are Willing to Put More Down, If They’re Given a Choice

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Consumers shopping for an auto loan predictably care most about their interest rate and monthly payment, according to a FICO study, but this suggests lenders can provide more options for down payment and loan term to optimize the customer experience.   

Americans cared most about interest rate with 94% of respondents marking it as an important factor when shopping for a loan, according to FICO’s 2018 Consumer Survey of Automotive Finance Perceptions. By comparison, 82% marked down payment as an important factor.

“I found it surprising that people [are willing] to put more down,” Ken Kertz, senior director of FICO’s auto and motorized segment, told The Center For Auto Finance Excellence. “Not everyone can [put more down], but for those that can it would be nice to have more options.”

A majority — 52% — of U.S. consumers only considered one finance offer when shopping for an auto loan in 2017 and 39% considered two or three options, according to the report. This could be an opportunity to give consumers what FICO called alternative deal structure capabilities.

“Some consumers, of course, have better access to additional financing sources, dependent on variables such as their credit profile and location,” the study stated. “Lenders can instantly present multiple loan offers with differing terms — [such as] length in months, percentage rate, amount of money down, etc. —  to optimize for the consumer’s preferred terms and avoid the customer leaving to shop elsewhere.”

Ben Werner, director of solution marketing at FICO, told CAFE, “Not everyone wants it a certain way,” and the consumer’s long-time relationship with a dealership or brand makes them “willing to pay more to get what they want.”

These options will become more prevalent as consumers move to online lending. Only 5% of consumers over the last three years sought auto financing online, according to the report, but 29% of respondents indicated that they would seek out online channels the next time they apply.  

Because of the rapid growth of online lending, Werner predicts that if you isolated the results to consumers who bought a loan in the last six months, online penetration would be much higher.

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