This section provides quick answers to questions relating to the auto financing industry, including those about competition in the marketplace, how consumers research their options, and the scope of options available to all consumers.
- Today, the majority of auto financing is done on site at the dealership. Last year alone, more than 24 million auto financing transactions occurred at dealerships. Dealing in such large volume allows dealers to offer competitive rates and access to multiple financing sources.
- Virtually all 16,000 automotive dealerships offer the convenience of one-stop shopping through on-site financing offerings that assist consumers in securing financing. Most dealerships work with at least 5 to 10 different banks or finance companies so that they can offer competitive deals to their customers.
- Because of a dealer’s access to multiple financing sources, consumers with all kinds of credit histories, including buyers considered to be high-risk, can secure competitive deals. Dealers have provided financing to millions of consumers with credit challenges.
- Customers can and do shop around for the best auto financing deals, demonstrating the high degree of competition in this marketplace:
- A record high 75% of new-vehicle buyers used the Internet in 2008 in their vehicle shopping process, up from 70% in 2007. Nearly 70% of these consumers look at consumer-generated content, such as vehicle ratings and reviews, while shopping for a new vehicle. (Data provided by the J.D. Power and Associates 2008 New Autoshopper.com StudySM)
- A 2004 study by Wirthlin Worldwide commissioned by Automotive Retailing Today reported that 50 percent of 887 consumers interviewed, all of whom had purchased or leased a car in the past 18 months, used the Internet to research their car purchases, and 26 percent used it to research financing alternatives. Twenty-three percent visited more than one dealership to find information on auto financing.
- There are multiple sources of financing for automobile purchases beyond dealerships and traditional banks. These include credit unions, savings banks, loans from stock brokerage firms, and home equity loans. This has created a highly competitive marketplace and lower rates for all consumers.
- Most dealers disclose to consumers that the finance rate they are offered may be negotiable and that the dealership may receive a portion of the finance charge for extending credit. Additionally, to help consumers make informed decisions, the National Automobile Dealers Association (NADA) and American Financial Services Association (AFSA), in cooperation with the Federal Trade Commission, created a brochure called “Understanding Vehicle Financing” that walks consumers through the auto financing process and encourages them to shop around to find the best deal.
- The current auto financing system employs hundreds of thousands of people, generating tremendous state and federal tax revenue.