Online financing is no longer just attracting subprimers


In the past, online consumers looking for auto loans mainly had subprime credit ratings. They thought if they were rejected they would rather avoid the embarrassment of personal rejection.

A much wider range of borrowers today use the internet to arrange auto finance, including those with sterling credit.

“A larger percentage of consumers submit loan applications online,” said James Houston, managing director of consumer lending and automotive finance at JD Power.

“It used to be: ‘Am I going to be admitted?’ Now we’re seeing people with high FICO scores (submitting loan applications online), ”he says during a JD Power webinar. “It’s one of the greatest things we’ve ever seen.”

“As more and more consumers search for vehicles online, they also research funding options earlier,” he adds. That pre-dealer exploration exploration was up five percentage points from 52% last year, according to JD Power Tracking. Research.

When it comes to customer satisfaction, consumers are happier when they get credit approval online “so they don’t have to go through this process at the retailer,” Houston says. “Consumer sentiment has shifted to ‘I don’t want to spend a lot of time at the dealership and worry about financing.” In addition, “we see more dealers who accept that”.

28% of consumers visit manufacturers ‘websites for funding information, while 25% visit lenders’ websites to apply for online funding.

Currently, 75% of new car loans are in the automaker’s proprietary financing arms. According to JD Power, that’s 60% more than two years ago. (James Houston, left)

The research company attributes the increase to the generous zero percent financing terms that automakers – through their captives – have recently offered to new car buyers to boost sales during the coronavirus crisis.

Many of these customer incentives include relatively long credit periods of 84 months. In general, the longer the credit period, the longer a consumer waits to buy a new vehicle. Apply for a payday loan in minutes at

However, recent research shows that the buying cycle for people with long-term auto loans is roughly the same as for consumers with short-term financing, says Tyson Jominy, vice president of data and analysis for JD Power.

Still, long credit periods and short purchase cycles can form a toxic alloy.

“It can catch up with you,” says Jominy. “You can only renew so many (outstanding credits)” before a consumer is seriously upside down and the outstanding credit amount exceeds the value of the vehicle.

Some consumers are willing to take the risk. They will re-enter the market “if they want to re-enter the market,” says Houston.


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