Customers bypass dealerships to finance cars

In the U.S., most car buyers arranged financing or the lease for their last vehicle through a dealership, but many plan to take a different route next time, according to FICO's latest vehicle financing survey.

FICO surveyed 2,000 people who financed or leased a vehicle in the past three years in more than nine countries. Of those respondents, 510 were U.S. customers. In the U.S., 63 percent of customers acquired financing at a dealership in 2018, according to FICO's 2019 Global Consumer Survey of Vehicle Finance Perceptions. That's down from 73 percent a year earlier.

For their next ride, however, 28 percent of American respondents said they plan to apply online, while 32 percent said they would visit a bank or some other financing institution. Only 40 percent said they would inquire at the dealership, according to FICO, a Silicon Valley analytics software firm known for its credit scoring model.

"There is currently a strong preference for dealership financing. This may be ripe for change," said Ken Kertz, senior director and practice leader of auto and motorized vehicles at FICO. The share of consumers acquiring vehicle financing online more than doubled last year to 13 percent, up from 5 percent in 2017.

Growing industry adoption of online financing, digital retailing and e-contracting tools will likely increase the number of online transactions, Kertz said, but technology limitations and state regulations prevent online vehicle financing from becoming more widespread. And the dealership is still the "epicenter," he added.

"There's certainly a lot of opportunity for lenders to improve the digital process," he said. But "customers would prefer simplicity and preapproved offers with rate subvention and incentives."