Should Lenders Be Teachers, Too?
I sometimes take issues with surveys and studies. In a lot of cases, companies or trade groups uses studies to create fear, manipulate public opinion, or spin a positive message. In other cases, the studies or surveys are just not conducted properly.
Another survey was released recently, which offered insights into the car-buying experience from consumers. The survey was conducted by a newly launched website that offers educational tools for potential car buyers.
While most of the published survey results dealt with the actual process of buying a car, there were some financing-related insights, too. Most notably:
- According to the survey, 44% of car buyers did not know their credit score, and
- 47% didn’t try to get pre-approved for financing
Even though less than half of those surveyed did any financing-related homework prior to buying their vehicle, nearly 80% of surveyed car buyers indicated that they had visited at least one website (manufacturer, dealer, or general automotive information) prior to buying a car.
Which brings me to my point: At a time when financial institutions are often accused of taking advantage of consumers who are uneducated or unaware of the financing process, are lenders doing enough to prepare their customers? How proactive should lenders be in educating their customers, and the general public, about what’s involved in getting a car loan?
Being proactive means more than posting some information on a website. It means more than a statement stuffer.
There is a tremendous amount of goodwill that is up for grabs for institutions that want to go out into local communities and offer honest-to-goodness financial education. There are a tremendous amount of business opportunities for institutions that want to partner with dealerships or other local companies in helping educate the public. There is a tremendous opportunity to use the internet to reach out to individual customers and offer resources and educational tools.
Or is consumer education not a responsibility that falls on the shoulders of those lending the money? Caveat emptor?
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How refreshing to see someone like Mike actually ask the finance industry to do something good for the borrower as well as the country.
But you are asking the people at the top of the dealership or finance chain to accept something less than maximum greed. It would need to start with the dealership developing some internal limits on what they would allow the F&I staff to do.
Then it It would require backbone for lenders to tell the stock analysts and investors that “for the good of our country”, they are not going to allow dealers to totally abuse the 47% that hoped that the finance desk of the car seller would try to “help them”. This would be through setting price gouging limits and financing limitations on additional pack items such as private warranty, rust proofing, etc. .
That is probably too much to ask. Eventually, legislation will force it unless the industry self-regulates – please stop laughing!
But Mike, it is good that you raise the question. This is an area that would really help our country.
You may find that end-of-year discounts/dealer & factory rebates, factory sales contests,etc to clear out 2011 inventory are a good reason to buy cars cars in December; and end-of-year financial numbers are very important to bank credit officers which means that manufacturers and dealers have an added incentive. The public understands this is a good time to buy a 2011 vehicle for sure and may be a good time for 2012’s.
Additionally, some trucks and large SUV’s may qualify for IRS deductions of full write-off or faster depreciation which has been in place for years past and probably will end this year. If a buyer has a choice to buy in December or January, it could make tax sense to buy in December.
And there are people that do give cars for Xmas gifts. Just look at upscale geo-codes to look for clues.
These are people that may get big bonuses (look at “heavy jewelry” sales from Tiffany’s as an example of big ticket gifts from the 1% crowd).
Awareness can be created by touching people just as you were touched enough to write your post. Car buying is not all rational – emotions play a big role.
Good post!