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Contents
Report homepage
Contents
Scope and Themes
Executive Summary
Insights and Opportunities
Inspire Insights
Market Drivers
Segment Performance
Dealership Financing—Domestics
Dealership Financing—Imports
Commercial Bank Auto Loans
Credit Unions
Brand Qualities
Innovations and Innovators
Marketing Strategies
Vehicle Purchasing
Vehicle Purchasing—New Versus Used
Reasons for Choosing Vehicle Financing
How Much is Put Down to Finance Vehicle
Finance Rate Locked in For Vehicle Purchase
Length of Loan For New Car Purchase
Ways to Prepare for Auto Financing
Ways to Research Auto Financing
Impact of Race and Hispanic Origin
Attitudes and Opinions about Personal Finance
Cluster Analysis
Appendix—Simmons Mosaic Analysis
Appendix—Trade Associations
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Vehicle Financing - US - December 2010
Table of Contents

Scope and Themes

Executive Summary

Consumers choosing financing or paying fully in cash

Consumers want low interest rates, convenience in their choice

Consumers paying fully in cash mainly to avoid interest rates

A quarter of financers put down 0% cash for their vehicle

5.56% average finance rate secured

Consumers choosing long loan terms to finance vehicles

Online plays leading role for researching auto financing

The U.S. automotive industry has been on a wild ride

GMAC (now Ally) posts profitability

Ford ‘most popular’ automaker

But consumer debt is staggering

Unemployment still high, new auto/light truck sales down from peak

Consumer credit scores are dropping

Default risk on subprime borrowing rises 406%

But how will industry react?

Credit unions gaining traction

Insights and Opportunities

Industry websites important to buyers

Credit unions need better advertising creative

Consequences of the “New Normal”

Inspire Insights

Trend—Solid as a Rock

Market Drivers

Key points

Cut-rate financing, shorter loan terms trending to help drive up sales

Persistent unemployment drives consumers to consider low financing

Figure 1: U.S. unemployment rate, by month, July 2008-October 2010

Disposable income remains limited in many households

Figure 2: Real disposable personal income, January 2007-January 2010

Consumer confidence remains at historically low level

Figure 3: Consumer Sentiment Index, 2007-09

New auto/light truck sales in decline from peak

Figure 4: New car and light truck sales, 2000-10

Recalls by top automotive manufacturers hurt public confidence

Increase in consumer debt forcing consumers to slow spending

Figure 5: Consumer debt, Q1 1999-Q1 2010

Segment Performance

Key points

Dealership finance and paying fully in cash top ways to finance

Figure 6: Financing chosen for the last new, used or leased vehicle, by gender, September 2010

Those aged 18-24 and 65+ most likely to pay in cash for vehicle

Figure 7: Financing chosen for the last new, used or leased vehicle, by age, September 2010

Dealership financing and cash main ways to finance

Figure 8: Financing chosen for the last new, used or leased vehicle, by household income, September 2010

Trends show slightly more financing through credit unions

Figure 9: Type of financing obtained for new/used vehicles, 2004-10

Dealership Financing—Domestics

Key points

Ford Credit

Ally (General Motors and Chrysler)

General Motors Financial Company

GM offers cashback or low interest rates

Chrysler Financial

Dealership Financing—Imports

Key points

BMW Financial Services

Toyota Financial Services

Hyundai Motor Finance

American Honda Finance Corporation

Other Imports

Commercial Bank Auto Loans

Key points

Capital One Pre-Approvals

Wells Fargo Refinancing

Chase $100 cashback

SunTrust Bank

PNC Bank

Bank of America

Credit Unions

Key point

Credit union APRs among the lowest

Figure 10: Select credit union auto finance offerings, October 2010

Brand Qualities

Key points

Credit unions, small banks have highest satisfaction rates

Figure 11: Customer satisfaction with financial products companies, among current and former customers, December 2009

BMW, Ford Credit rate high for financial services

Figure 12: New vehicle consumer financing ratings*, 2008

Innovations and Innovators

Power flat financing less risk to dealers, more incentive to sell aftermarket

BMW Financial reaches out to owners to get them better rates

BMW incorporating iPad, faster software to speed transactions

Automakers tailor incentives to reflect recession theme

Marketing Strategies

Overview

Online Advertising

U.S. Bank
Figure 13: U.S. Bank Auto Loan online advertisement, 2010
USAA Auto Circle
Figure 14: USAA Auto Circle online advertisement, 2010
Chevrolet
Figure 15: Chevrolet 2011 Silverado online advertisement, 2010
Honda
Figure 16: Honda CBR600RR Wanna Ride? online advertisement, 2010
Summit Federal Credit Union
Figure 17: Summit Federal Credit Union online advertisement, 2010
Volkswagen Jetta
Figure 18: Volkswagen Sign Then Drive online advertisement, 2010

Direct Mail

San Diego County Credit Union
Figure 19: San Diego County Credit Union Auto Loans direct mail ad, 2010
Wells Fargo
Figure 20: Wells Fargo Auto Refinance direct mail ad, 2010
State Farm Bank Auto Loans
Figure 21: State Farm Bank Auto Loans direct mail ad, 2010
Toyota
Figure 22: Toyota 100% of MSRP financing direct mail ad, 2010

Print Advertising

PNC Bank
Figure 23: PNC Bank Auto Loan print ad, 2010
First Community Credit Union
Figure 24: First Community Credit Union Auto Loan print ad, 2010
Keesler Federal Credit Union
Figure 25: Keesler Federal Credit Union Auto Loan print ad, 2010
Financial Resources Credit Union
Figure 26: Financial Resources Credit Union Auto Loan print ad, 2010

Email

Capital One Auto Loan
Figure 27: Capital One Auto Loans email ad, 2010
Lending Tree
Figure 28: Lending Tree Auto Loan Refinancing email ad, 2010
Chase Auto Loans
Figure 29: Chase Auto Loans email ad, 2010

Broadcast advertising

Honda
Figure 30: Mr. Opportunity Night on the Town Honda Clearance TV ad, 2010
Toyota
Figure 31: Toyota Sienna TV ad, 2010
BMW
Figure 32: BMW Ultimate Driving Machine TV ad, 2010

Vehicle Purchasing

Key point

Four in 10 have purchased a vehicle in past three years

Figure 33: Vehicle purchasing, by gender, age and household income, September 2010

Vehicle Purchasing—New Versus Used

Key points

Buy new still most prevalent

Figure 34: Whether last vehicle bought was new, used or leased, by gender, September 2010

Buying a new vehicle skews to older segments

Figure 35: Whether last vehicle bought was new, used or leased, by age, September 2010

Buying new skews to higher incomes

Figure 36: Whether last vehicle bought was new, used or leased, by household income, September 2010

Reasons for Choosing Vehicle Financing

Key points

Interest charges top reason to pay cash

Figure 37: Reasons why paid 100% cash for the vehicle, September 2010

For those who financed, low interest rate key

Figure 38: Reasons for using this type of financing to pay for auto loan, by source of financing, September 2010

Low interest rates, convenience top reasons why financing is chosen

Figure 39: Reasons for using this source of financing to pay for auto loan, by gender, September 2010

Low interest rates especially important to those aged 25-34

Figure 40: Reasons for using this source of financing to pay for auto loan, by age, September 2010

Low interest rates more valued as household income increases

Figure 41: Reasons for using this source of financing to pay for auto loan, by household income, September 2010

How Much is Put Down to Finance Vehicle

Key points

A quarter of financers put down 0%

Figure 42: Percentage of cash put down when financing vehicle in last three years, by gender, September 2010

Zero cash down highest among the over-45s

Figure 43: Percentage of cash put down when financing vehicle in last three years, by age, September 2010

Middle-income households most likely to put 5-19% of cash down

Figure 44: Percentage of cash put down when financing vehicle in last three years, by household income, September 2010

Finance Rate Locked in For Vehicle Purchase

Key points

Average finance rate secured is 5.56%

Figure 45: Finance rate among those who secured auto financing, by gender, September 2010

Length of Loan For New Car Purchase

Key points

Most choosing second-longest loan term

Figure 46: Length of loan for vehicle, by gender, September 2010

25-34 year olds most likely financing the longest

Figure 47: Length of loan for vehicle, by age, September 2010

High-income households invested in long loan terms

Figure 48: Length of loan for vehicle, by household income, September 2010

Ways to Prepare for Auto Financing

Key points

Majority of financers creating budget to determine rates

Figure 49: Steps taken before entering the vehicle financing process, by gender, September 2010

25-44-year-olds most involved in preparations

Figure 50: Steps taken before entering the vehicle financing process, by age, September 2010

Respondents from households earning $75K-99.9K research online

Figure 51: Steps taken before entering the vehicle financing process, by household income, September 2010

Ways to Research Auto Financing

Key points

Online plays leading role for researching auto financing

Figure 52: How buyers researched the vehicle financing process, by gender, September 2010

Online research rated highest among those aged 25-44

Figure 53: How buyers researched the vehicle financing process, by age, September 2010

Online research lowest among households earning the least

Figure 54: How buyers researched the vehicle financing process, by household income, September 2010

Impact of Race and Hispanic Origin

Key points

Hispanics most active in purchasing new

Figure 55: Whether vehicle bought was new, used or leased, by race and Hispanic origin, September 2010

Hispanics least likely to pay fully in cash

Figure 56: Financing chosen for the last new, used or leased vehicle, by race and Hispanic origin, September 2010

Hispanics show greater value for ease of negotiation

Figure 57: Reasons for using this type of financing to pay for auto loan, by race and Hispanic origin, September 2010

Hispanics putting down greater amount of cash

Figure 58: Percentage of cash put down when financing vehicle in last three years—whites vs. Hispanics, September 2010

Blacks paying higher interest rates

Figure 59: Finance rate among those who secured financing, by race and Hispanic origin, September 2010

Hispanics most likely to develop budget

Figure 60: Steps taken before entering the vehicle financing process, by race and Hispanic origin, September 2010

Hispanics most active in online research

Figure 61: How buyers researched the vehicle financing process, by race and Hispanic origin, September 2010

Attitudes and Opinions about Personal Finance

Key points

Consumers very conservative about money

Figure 62: Attitudes and opinions about personal finance, by gender, April 2009-June 2010

Confidence with money grows with age

Figure 63: Attitudes and opinions about personal finance, by age, April 2009-June 2010

Cluster Analysis

Shoppers

Demographics
Characteristics
Opportunity

Pokers

Demographics
Characteristics
Opportunity

Divers

Demographics
Characteristics
Opportunity

Cluster characteristics

Figure 64: Vehicle financing clusters, September 2010
Figure 65: Financing chosen for the last new, used or leased vehicle, by vehicle financing clusters, September 2010
Figure 66: Reasons why buyers used this type of financing to pay for auto loan, by vehicle financing clusters, September 2010
Figure 67: Steps taken before entering the vehicle financing process, by vehicle financing clusters, September 2010
Figure 68: How buyers researched the vehicle financing process, by vehicle financing clusters, September 2010

Cluster demographics

Figure 69: Vehicle financing clusters, by gender, September 2010
Figure 70: Vehicle financing clusters, by age, September 2010
Figure 71: Vehicle financing clusters by household income, September 2010
Figure 72: Vehicle financing clusters, by race, September 2010
Figure 73: Vehicle financing clusters, by Hispanic origin, September 2010

Cluster methodology

Appendix—Simmons Mosaic Analysis

Key points

Mosaic segments vary slightly in usage of financing channels

Figure 74: Type of purchase method of new/used vehicle, by Mosaic segment, April 2009-June 2010

Affluent segments more inspired about cars

Figure 75: Attitudes and opinions about automobiles, percent who agree with statement, by Mosaic segment (part 1), April 2009-June 2010
Figure 76: Attitudes and opinions about automobiles, percent who agree with statement, by Mosaic segment (part 2), April 2009-June 2010

Affluent sectors likely to be well informed financially

Figure 77: Attitudes and opinions about personal finance, percent who agree with statement, by Mosaic segment (part 1), April 2009-June 2010
Figure 78: Attitudes and opinions about personal finance, percent who agree with statement, by Mosaic segment (part 2), April 2009-June 2010

Appendix—Trade Associations