Online car finance purchases are expected to rise by 33%, accounting for more than half (56%) of transactions for the first time ever. The move away from the traditional dealership model comes as Brits become more open to shopping around for their own finance deals, with 60% saying searching online for car finance is their preferred option and 63% think shopping online for car finance is more convenient.
And the financial rewards of the online alternatives are clear: those who arrange car finance options online could save up to £797, according to new figures released by car finance provider Zopa.
Potential buyers are also put off by the traditional process of a car dealership offering the finance deal as half admit they’re nervous about the prospect of negotiating costs with a dealer face to face. A further 49% of Brits surveyed suggest haggling simply isn’t a part of modern life and 13% of Brits say they’ve never negotiated when buying something.
And being uncomfortable can cause people to make uninformed decisions. More than one in 10 people who bought a car in the last five years admit they accepted a deal on car finance from a dealer that they didn’t feel was good value and nearly one in five decided to avoid the process altogether and put off buying a car.
The shift online comes as more people see the benefits of organising car finance themselves, with 61% of Brits saying shopping online gives them greater control and 72% preferring to shop at their own pace. The ease comes from access to information too, with a third (36%) valuing the transparency of comparing deals online and 28% the ability to research running costs at the same time as the car finance options, allowing them to manage the financial decision better. The Coronavirus was also a consideration, with nearly half of those questioned (45%) saying they would be more likely to shop online for their finance now than before the pandemic.
In line with consumer demands to take control and avoid the hassle of added negotiations with car dealers, Zopa now offers a ‘mortgage-style’ car finance product with the loan secured against the car. Customers arrange finance on the vehicle prior to going into a dealership. Zopa’s offering puts the customer in control of financing their car as it carries out all background checks, paperwork online and contacts the dealership about the money directly. This enables the customer to have peace of mind and certainty of how much the car will cost them before stepping foot on the forecourt.
Tim Waterman from Zopa says: “For a long time, dealers had control of the customers’ finance deal, and until recent restrictions put in place by the FCA, could be incentivised to offer a higher loan APR. While of course not all dealers are the same, this situation has caused consumer mistrust. Wider availability of online finance deals such as Zopa’s has shifted the control, making it possible for consumers to find a deal that truly works for them.
“A car isn’t a frequent or low value purchase, so it’s understandable that people want to take their time when finding the right deal and do it on their own terms. Zopa’s secured car finance aims to increase transparency and convenience as people can sort out their finance online before going to a dealership, putting them in complete control of how they finance their next car.”
Consumers are able to find a finance option from the comfort of their own sofa as drivers can go directly to Zopa’s website and apply for a Hire Purchase car loan in as little as 3 minutes. The customer also has certainty of price as Zopa provides them with a guaranteed loan rate and monthly breakdown before a full application is submitted. These personalised pre-approved details are provided on a soft search without marking the customer’s credit file, giving them added certainty and the ability to continue to shop around.
Zopa shares its tips for how to secure a good deal on a second-hand car and car finance:
- Start by exploring all your options – with the range of different options available to customers, it can often feel overwhelming. Make sure to explore all options available to you via soft search and opt for one which offers complete transparency and aligns with your financial situation. Not all providers offer soft search, so you’ll need to check before you get a quotation.
- Get a pre-approved loan sorted – this allows you to know what options are open to you and you can be confident you’re getting the best deal available. Look at providers that do an initial soft search to give you confidence on approval and the rate you’ll receive.
- Think about timing – March and September see new cars released, which are often bought through part-exchange deals. This means dealers will have lots of cars to sell, which puts the consumer in a strong bargaining position.
- Research costs and see how much the vehicle you want is going for elsewhere – you will know what a good deal is if you’ve been able to compare costs yourself, so make sure you look around and see what other dealers are offering on similar vehicles to make sure you’re happy with the price that is being offered.
- If you want to go direct to a dealer, do your homework – it’s important to remember that not all dealers are the same. Ask friends and family for their recommendations or check out reviews online via Autotrader or Trustpilot.