Car buyers favour dealer finance especially with transparent online options

According to a new survey, 69% of consumers now consider financing directly through dealerships as their preferred option, particularly when dealers provide clear, upfront details about financing options and costs on their websites.

The latest data from Motors’ Consumer Insight Panel indicates a growing preference for dealer-provided financing among car buyers, edging out banks and other traditional lenders in consumer preference.

This shift in preference also comes at a pivotal time for the sector, following the recent Court of Appeal ruling requiring greater transparency around commission disclosures in car financing. Although Motors conducted its survey before the ruling, it said the findings align well with the increased regulatory emphasis on clarity in finance offerings, a factor likely to further enhance consumer confidence in dealership finance.

Notably, the survey found that 71% of buyers are more likely to choose dealer finance if all options are available to review online, underscoring the importance of transparency in today's digital-first retail landscape.

While 61% of respondents still consider outside sources, such as banks, for financing, the ease of accessing dealership finance options online is a major selling point for consumers.

Being able to assess financing terms without needing to visit multiple institutions gives buyers the flexibility to make informed decisions, with dealership transparency helping to build trust.

The data also reveals an increasing demand for flexible payment options, such as monthly instalments, suggesting that buyers are not only interested in dealer financing but are also exploring ways to make vehicle purchases more affordable over time.

In 2022, only 28% of car buyers financed their last purchase with monthly payments, whereas this figure has risen to 35% in the latest survey. Additionally, those planning to use monthly payment finance for their next vehicle purchase grew from 33% to 37% year-over-year, indicating that demand for structured financing solutions through dealerships is on the rise.

Monthly payment models provide an attractive option for consumers who prefer the predictability of spreading payments over a set period, and dealer finance offerings allow buyers to conveniently explore tailored finance packages.

This approach aligns with the broader trend of simplifying the car-buying experience, allowing dealerships to cater to a diverse range of budgets while enhancing customer loyalty.

In addition to flexible monthly financing, consumer interest in all-inclusive monthly car subscriptions has also risen, with 47% of survey participants expressing interest in subscription models that cover servicing, road tax, insurance, and breakdown cover, up from 42% in 2022.

The steady increase in demand for comprehensive subscription packages highlights a shift in buyer preferences, with consumers looking for convenient, one-stop solutions that reduce the hassle of managing multiple services separately.

"Our research underscores the importance buyers place on transparent and accessible financing options," said Lucy Tugby, marketing director of Motors. "Consumers value being able to see all available financing details online, which helps them appraise their options and ultimately boosts their confidence in choosing dealer finance."