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US dealer finance departments may be losing ground to direct lenders

According to Kelley Blue Book's latest US "New Vehicle Buyer Attitude Study" on vehicle finance options, 70% prospectived new car buyers plan to research financing online and 54% plan to obtain finance befre visiting the dealer, while only 46% of respondents indicate that they intend to finance their purchase at the dealership.

The principal reason consumers plan to obtain financing prior to purchasing is because they feel they can secure a lower interest rate than at the dealer (43%). Interestingly enough, consumers who plan to finance through the dealership also say they plan to do so because they feel they can secure a lower interest rate (52%).

Kelley's research indicates the average buyer is likely to seek financing outside the dealership, to prefer a longer loan with smaller payments, will most likely use cash as a down payment, and will, on average, finance 85% of the vehicle's cost.

A year ago, Jupiter Research reported that online financing represented only 1% of the US vehicle finance market. Now the Kelley Blue Book study shows that 13% of car buyers anticipate financing their next loan online (8% via bank or credit union web sites and 5% via online financing companies). The Kelley research indicates a key reason for choosing to obtain financing prior to purchasing a vehicle is for greater control in the negotiation process (36%). This contrasts with those planning to finance at the dealership who indicate convenience (33%) as a reason for doing so. More information: www.kbb.com

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