SuperMoney’s platform launched with personal loans in April which could include unsecured auto purchases, but the new vertical allows for secured, unsecured, refinance, and private-party auto loans all in one place.
Although Lulic declined to provide a full list of lenders, the website displays featured financial institutions such as SunTrust Bank’s Lightstream platform, SpringboardAuto.com, AutoPay, Prosper Marketplace Inc., LendingClub, and LendingPoint. Several other banks and captives are also on the website, but not all will be displayed once users input personal information and request the best results for their loan needs.
By comparing prices and making the full cost of interest payments over the length of the loan more transparent, Lulic hopes the platform will save money for subprime and near-prime borrowers.
“A lot of people just don’t have the personal finance knowledge to know how much the interest expense has on their overall cost of automobile ownership — it’s hard to do that math,” he said. “[Subprime consumers] don’t have as many options, but we can bring these direct lenders to the table who give some more savings on these interest costs than if they just went to some used-car dealership and took whatever high-interest-rate loan that was offered to them.”
A 2015 study by the Federal Reserve showed that 76.1% of car buyers negotiated the purchase price with the seller, but only 31.6% negotiated the interest rate on their loan. Furthermore, 27.1% of car buyers considered the monthly payment on their auto loan as the most important factor, but just 6.1% considered the interest rate on the loan as the most important factor, the study found.
Yet those rates come at a large price that consumers are unaware of, according to a company press release. For example, a $35,000 auto loan with a 3% APR will cost the borrower $37,734 over the life of a 60-month loan. However, the same loan with a 7% APR will cost $3,849 more over the same period.
Furthermore, dealers know this and hide it with longer loan terms, according to the release. To illustrate, that $35,000 auto loan with a 5% APR and a 36-month term will have a total cost of $37,763; but extend it to a 72-month term and the cost over the life of the loan increases to $40,584, even though it may lower the monthly payment.
“We show and calculate what your total cost of repayment will be and we make it transparent,” Lulic said. “The dealer is going to have that on their bill of sale eventually, but by that point [the customer] has already agreed and they are signing, whereas we are trying to do it more upfront.”
SuperMoney’s auto finance vertical is live now, click here to check it out.Like This Post