By Mia Bevacqua
Shopping for an auto loan can be time-consuming. That’s why, according to a new study from peer-to-peer lending company, LendingClub, so many car buyers don’t research payment options.
The problem is, consumers who don’t do their homework could be missing out on significant savings. In fact, LendingClub estimates that U.S. car buyers could save as much as $37 billion if they spent some time researching how to finance their vehicle.
In other words: Ignorance is not bliss. At least not according to the study, which found that 33% of auto loan borrowers don’t know their annual percentage rate (APR). Furthermore, 48% of all buyers say they’re more likely to research what to watch on TV than auto payment options.
And it gets worse. Nearly half (43%) of all consumers said they know more about shopping with a smart home device than they do about refinancing auto loans.
“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.”
Most consumers are aware they need to research before they take out an auto loan. Yet they still don’t do it. Approximately 81% of those surveyed in the study said they would look into financing. But, in reality, only 59% actually followed through and did any research.
Many consumers don’t believe they will end up saving enough money to make researching finance worth their while. But, according to a recent report from the Wall Street Journal, many Americans are getting in over their heads with seven-year loans. So, putting in a little more effort might be wise.
Note: The auto loan awareness study was conducted online by The Harris Poll on behalf of LendingClub.