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Auto Financing - Canada - December 2015

“Many auto finance consumers are looking for more clarity. Increased transparency, no ‘fine-print’ clauses and clear communication are ways to increase customer satisfaction and referral business.”
– Sanjay Sharma, Senior Financial Services Analyst

This report discusses the following key topics:

  • Overall affordability is the most important decision factor
  • Dealership financing, bank loans and manufacturer financing are the three top non-self-financing choices 
  • Satisfaction with dealership finance is high
  • Consumers are generally cautious about loan terms and monthly payments

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Table of contents

  1. Overview

      • Scope
        • Regional classifications
          • Income
          • Executive Summary

              • The issues
                • Overall affordability is the most important decision factor
                  • 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
                  • Figure 2: Payment methods, October 2015
                • Satisfaction with dealership finance is high
                  • Figure 3: Satisfaction with dealership financing, October 2015
                • Consumers are generally cautious about loan terms and monthly payments
                  • Figure 4: Attitudes related to financing decisions, October 2015
                • The opportunities
                  • Flexibility in loan payment terms and targeted incentives are strong selling points
                    • 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
                      • Figure 6: Decision factors when choosing a financing option, October 2015
                    • What it means
                    • The Market – What You Need to Know

                      • 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

                            • Canada’s population is expected to age in the coming years
                              • 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

                                  • 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

                                          • 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?

                                                          • 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

                                                                • 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

                                                                          • Around two in five consumers use cash or savings
                                                                            • Figure 9: Payment methods, October 2015
                                                                          • Decline in popularity of lease financing
                                                                            • Higher income households more likely to use auto manufacturer financing
                                                                              • Figure 10: Auto manufacturer financing, by household income, October 2015
                                                                            • Younger consumers more receptive to peer-to-peer lending
                                                                              • Figure 11: Attitudes related to financing choices, October 2015
                                                                            • Chinese Canadians are more likely to use cash/savings, while Quebecers are less likely
                                                                              • Figure 12: Paying with cash or savings, Chinese Canadians and Quebecers vs overall population, October 2015
                                                                          • Length of Financing

                                                                              • About a third of consumers have five-to-seven year terms
                                                                                • Figure 13: Length of financing, October 2015
                                                                              • More than half of consumers are looking for flexibility in payments
                                                                                • Figure 14: Attitudes related to financing decisions, October 2015
                                                                              • Younger consumers and those born outside Canada conduct more research
                                                                              • Making the Financing Decision

                                                                                  • Affordability over the term of the loan is the most important decision factor
                                                                                    • Figure 15: Decision factors when choosing a financing option, October 2015
                                                                                  • But recommendations also matter…
                                                                                    • Three target groups
                                                                                      • Figure 16: Target groups, October 2015
                                                                                    • Dealership enthusiasts (32%)
                                                                                      • Self-financiers (28%)
                                                                                        • Disengaged (40%)
                                                                                        • Interest in Incentives

                                                                                            • Low interest and monthly payments are of most interest
                                                                                              • Figure 17: Interest in incentives and features, October 2015
                                                                                            • Atlantic Canadians more attracted by affordability
                                                                                              • Figure 18: Interest in incentives related to affordability, Atlantic Canadians vs overall population, October 2015
                                                                                            • Chinese Canadians less interested in incentives
                                                                                              • 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
                                                                                                  • Figure 20: Interest in incentives and features – CHAID – Tree output, October 2015
                                                                                                  • Figure 21: Interest in incentives and features– CHAID – Table output, October 2015
                                                                                              • At the Dealership

                                                                                                  • Satisfaction with dealership finance is high
                                                                                                    • Figure 22: Satisfaction with dealership financing, October 2015
                                                                                                  • About half of consumers dislike the dealership sales environment
                                                                                                    • Figure 23: Attitude regarding dealership environment, October 2015
                                                                                                  • Younger consumers more likely to find auto finance options to be complicated
                                                                                                    • 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

                                                                                                    • Most Canadians own a car, truck or van
                                                                                                      • Figure 25: Ownership of type of automobile, October 2015
                                                                                                    • Over a third are influenced by financing incentives when choosing their vehicle
                                                                                                      • Figure 26: Attitude related to the influence of financing incentives on choice, October 2015
                                                                                                  • Appendix – Data Sources and Abbreviations

                                                                                                    • Data sources
                                                                                                      • Consumer survey data
                                                                                                        • Consumer qualitative research
                                                                                                          • Abbreviations and terms

                                                                                                          Companies Covered

                                                                                                          To learn more about the companies covered in this report please contact us.

                                                                                                          Auto Financing - Canada - December 2015

                                                                                                          £3,277.28 (Excl.Tax)