LendingClub (NYSE: LC), America’s largest online marketplace connecting borrowers and investors, today released findings from its survey on consumer awareness of auto loan financing. The study, conducted online by The Harris Poll on behalf of LendingClub, found that auto financing is among the lowest of priorities for buyers.
The key takeaway: Many car buyers are not researching how to finance their vehicle and this misguided strategy is costing them far more in the long run – approximately $37B in potential savings, to be exact.
The LendingClub study also illustrates the knowledge gap among buyers when it comes to basic auto finance:
- One-third (33%) of recent auto loan borrowers don’t know their APR
- A sizable portion of intenders (40%) aren’t sure what APR to expect
- Almost half of all buyers (48%) say they’re more likely to research what to watch next on TV/streaming than inquire about payment options for a new vehicle
- Almost half of all borrowers (43%) also said they know more about shopping with smart home devices than they do about refinancing auto loans
- Many buyers (44%) incorrectly believe that in order to refinance, you have to wait at least one year after you take out the initial car loan
“When you consider the fact that auto loan debt is the third-largest type of household debt (behind mortgages and student loans), it’s alarming how little attention is given to auto loans when people purchase vehicles,” said Todd Denbo, Senior VP & General Manager, Auto at LendingClub. “Nearly half of car buyers rely on financing. It’s clear that we need to provide more accessible education and resources on auto refinancing to make it a less daunting part of the car-buying process.”
Good Intentions Are Not Always Good
The study found that intenders (those somewhat likely to purchase, finance, or lease a vehicle in the next 12 months) have the right intentions at the outset, with a majority (81%) saying they will do some kind of research into financing; however, in reality, a much smaller number of recent buyers (59%) actually did any kind of research about financing. Many also have an apathetic view on the actual monetary impact loans will have, leading them to believe the time spent researching their options isn’t justified. In fact, only 35% of buyers (those that have either purchased, financed, or leased a vehicle in the past 12 months), spend time looking for the best financing options versus the best price on their vehicle.”
What Buyers Don’t Know Will Hurt Them
Despite higher awareness of refinancing among recent car buyers and intenders (75%) versus the average American (47%) many don’t understand the details. While there is some awareness of refinancing, they feel they need to be able to save enough to make the effort of refinancing worthwhile. The general idea among buyers that the savings opportunity is low more often than not is causing them to leave money on the table. More than one-third of all buyers (37%) say it’s not worth researching financing or leasing terms, because they assume those rates are usually non-negotiable.
The study also found that buyers are risk-averse in the context of the current economic climate. Though four in ten think that auto loans might cause the next financial crisis, buyers appear to lean safe when it comes to their loans. Nearly half of both buyers and intenders (49%) say they plan to pay off their loan early, and most (62%) say they’ve been much more cautious since the last financial crisis. Considering the majority of buyers and intenders (73%) say it only makes sense to refinance when rates go down, there is a very real possibility that they are spending more than they should.
To help demystify auto refinancing, LendingClub is committed to providing consumers with the resources they need to make an informed decision when buying a car. For more information about auto refinancing, please visit: www.lendingclub.com/loans/auto-refinancing.
This survey was conducted online within the United States by The Harris Poll on behalf of LendingClub from May 1-15, 2019 via a self-administered online questionnaire. Qualified respondents either purchased, financed, or leased a vehicle in the past 12 months (“buyers,” n=1,891) or were at least somewhat likely to purchase, finance, or lease a vehicle in the next 12 months (“intenders,” n=1,110). The raw data has been weighted by several demographic variables where necessary to reflect the composition of the general adult population. This online survey is not based on a probability sample and therefore no theoretical sampling error can be calculated.
LendingClub was founded to transform the banking system to make credit more affordable and investing more rewarding. Today, LendingClub’s online credit marketplace connects borrowers and investors to deliver more efficient and affordable access to credit. Through its technology platform, LendingClub is able to create cost efficiencies, and passes those savings on to borrowers in the form of lower rates and to investors in the form of potentially higher risk-adjusted returns. LendingClub is based in San Francisco, California. More information is available at https://www.lendingclub.com.
About The Harris Poll®
The Harris Poll is one of the longest running surveys in the U.S. tracking public opinion, motivations and social sentiment since 1963 that is now part of Harris Insights & Analytics, a global consulting and market research firm that delivers social intelligence for transformational times. We work with clients in three primary areas; building twenty-first-century corporate reputation, crafting brand strategy and performance tracking, and earning organic media through public relations research. Our mission is to provide insights and advisory to help leaders make the best decisions possible. To learn more, please visit www.theharrispoll.com