Table of Contents
Executive Summary
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- The issues
- Overall affordability is the most important decision factor
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- Figure 1: Decision factors when choosing financing option, October 2015
- Dealership financing, bank loans and manufacturer financing are the three top non-self-financing choices
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- Figure 2: Payment methods, October 2015
- Satisfaction with dealership finance is high
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- Figure 3: Satisfaction with dealership financing, October 2015
- Consumers are generally cautious about loan terms and monthly payments
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- Figure 4: Attitudes related to financing decisions, October 2015
- The opportunities
- Flexibility in loan payment terms and targeted incentives are strong selling points
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- Figure 5: Attitudes related to incentives and demand for flexibility, October 2015
- Overwhelmed consumers represent a clear opportunity for dealerships to offer expert advice
- Harnessing the power of recommendations and familiarity
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- Figure 6: Decision factors when choosing a financing option, October 2015
- What it means
The Market – What You Need to Know
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- Aging population likely to positively impact financing choices
- Increasing diversity poses a challenge to auto finance companies
- Growth in auto loan market raises concerns
Market Factors
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- Canada’s population is expected to age in the coming years
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- Figure 7: Population aged 65 years and over in Canada, historical and projected (% of total), 1971-2061
- Figure 8: Projected trends in the age structure of the Canada population, 2014-19
- The population is growing and ethnically diverse
- Canada’s economy rebounds but momentum appears weak
- Auto loan market growth raises concerns
Key Players – What You Need To Know
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- Captive lenders
- New distribution models likely to emerge to better match lenders and borrowers
- P2P lenders are an emerging alternative
- Tesla bypassing dealerships
Captive Lenders
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- Captive lenders
- Ford Credit
- RBC Automotive Finance
- Honda Canada Finance
- Toyota Financial Services
- Hyundai Capital Canada
- TD Auto Finance
- Mercedes-Benz Financial Services
What’s Changing?
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- New distribution models likely to emerge to better match lenders and borrowers
- P2P lenders are an emerging alternative
- Tesla bypassing dealerships
The Consumer – What You Need to Know
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- Around two in five consumers use cash or savings
- Low interest and monthly payments are of most interest
- Satisfaction with dealership finance is high
- Younger consumers more likely to find auto finance options complicated
Payment Methods
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- Around two in five consumers use cash or savings
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- Figure 9: Payment methods, October 2015
- Decline in popularity of lease financing
- Higher income households more likely to use auto manufacturer financing
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- Figure 10: Auto manufacturer financing, by household income, October 2015
- Younger consumers more receptive to peer-to-peer lending
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- Figure 11: Attitudes related to financing choices, October 2015
- Chinese Canadians are more likely to use cash/savings, while Quebecers are less likely
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- Figure 12: Paying with cash or savings, Chinese Canadians and Quebecers vs overall population, October 2015
Length of Financing
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- About a third of consumers have five-to-seven year terms
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- Figure 13: Length of financing, October 2015
- More than half of consumers are looking for flexibility in payments
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- Figure 14: Attitudes related to financing decisions, October 2015
- Younger consumers and those born outside Canada conduct more research
Making the Financing Decision
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- Affordability over the term of the loan is the most important decision factor
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- Figure 15: Decision factors when choosing a financing option, October 2015
- But recommendations also matter…
- Three target groups
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- Figure 16: Target groups, October 2015
- Dealership enthusiasts (32%)
- Self-financiers (28%)
- Disengaged (40%)
Interest in Incentives
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- Low interest and monthly payments are of most interest
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- Figure 17: Interest in incentives and features, October 2015
- Atlantic Canadians more attracted by affordability
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- Figure 18: Interest in incentives related to affordability, Atlantic Canadians vs overall population, October 2015
- Chinese Canadians less interested in incentives
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- Figure 19: Interest in incentives related to affordability, Chinese Canadians vs overall population, October 2015
- CHAID analysis – Auto financing
- Methodology
- Over-45s who used dealer financing are more likely to be enticed by zero/low interest rates
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- Figure 20: Interest in incentives and features – CHAID – Tree output, October 2015
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- Figure 21: Interest in incentives and features– CHAID – Table output, October 2015
At the Dealership
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- Satisfaction with dealership finance is high
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- Figure 22: Satisfaction with dealership financing, October 2015
- About half of consumers dislike the dealership sales environment
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- Figure 23: Attitude regarding dealership environment, October 2015
- Younger consumers more likely to find auto finance options to be complicated
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- Figure 24: Selected attitudes about auto financing, October 2015
- Overwhelmed consumers represent a clear opportunity for dealerships to offer expert advice
Influence of Financing on Automobile Choice
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- Most Canadians own a car, truck or van
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- Figure 25: Ownership of type of automobile, October 2015
- Over a third are influenced by financing incentives when choosing their vehicle
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- Figure 26: Attitude related to the influence of financing incentives on choice, October 2015
Appendix – Data Sources and Abbreviations
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- Data sources
- Consumer survey data
- Consumer qualitative research
- Abbreviations and terms
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