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Auto Financing - Canada - August 2018

“Dealerships have a clear point-of-sale advantage in the financing process and satisfaction levels are high, solidifying their place as a convenient one-stop shopping experience.”

– Sanjay Sharma, Senior Financial Services Analyst

This report examines the following issues:

  • Most Canadians own at least one vehicle
  • Cash and dealership financing are the most popular payment methods
  • Low monthly payments and recommendations are the top influencers
  • Overall satisfaction with dealership financing is high
  • Affordability factors are most important

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Table of contents

  1. Overview

      • Regional classifications
        • Income
          • Scope
          • Executive Summary

              • The issues
                • Most Canadians own at least one vehicle
                  • Figure 1: Number of vehicles in the household, May 2018
                • Cash and dealership financing are the most popular payment methods
                  • Figure 2: Payment methods used for last purchase, May 2018
                • Low monthly payments and recommendations are the top influencers
                  • Figure 3: Decision factors influencing financing, May 2018
                • Overall satisfaction with dealership financing is high
                  • Figure 4: Satisfaction with dealership financing, May 2018
                • Affordability factors are most important
                  • Figure 5: Interest in financing incentives, May 2018
                • The opportunities
                  • Younger consumers more reliant on recommendations
                    • Figure 6: Decision factors influencing financing, May 2018
                  • Familiarity is a key influencer for older consumers
                    • Zero and low monthly payments are of more interest to women
                      • Figure 7: Interest in financing incentives (select), by gender, May 2018
                    • Newcomers and overwhelmed consumers represent a clear opportunity for dealerships to offer expert advice
                      • Figure 8: “Automobile financing options are too complicated to understand” (% agree), by gender, May 2018
                    • What it means
                    • The Market – What You Need to Know

                      • Aging population is not great news for auto financing
                        • A growing population and diversity will boost demand
                          • Improved perceptions of financial health positive for car purchase
                            • Canadian vehicle sales hit the two million mark for first time in 2017
                              • Bank of Canada raises interest rates amidst trade tensions
                                • Impact of the sharing economy on car financing
                                • Market Factors

                                  • Canada’s population is aging
                                    • Figure 9: Population aged 0-14 and 65+, as of July 1, 1995-2035*
                                  • Aging population is not great news for auto financing
                                    • Figure 10: Canadian population, by age, 2016
                                  • A growing population and diversity will boost demand for car finance
                                    • Improved perceptions of financial health positive for car purchase
                                      • Canadian vehicle sales hit the two million mark for first time in 2017
                                        • Canadian household debt ratio declines
                                          • Bank of Canada raises interest rates amidst trade tensions
                                            • Impact on auto financing
                                              • Peer to peer lending
                                                • Impact of the sharing economy on car financing
                                                  • Self-driving cars and car financing
                                                  • Key Players – What You Need to Know

                                                    • AutoGravity and AutoFi take car financing into the digital age
                                                      • TD Auto Finance partners with AutoGravity
                                                        • LendingArch’s new rate comparison technology
                                                          • Axis Auto Finance completes the acquisition of cars on Credit Financial
                                                            • Fair
                                                            • Innovations & Industry Developments

                                                              • LendingArch’s new rate comparison technology
                                                                • Axis Auto Finance completes the acquisition of Cars on Credit Financial
                                                                  • Credit Karma rolls out a hub to check out the details of your car
                                                                    • Fair
                                                                    • What’s New?

                                                                      • AutoGravity and AutoFi take car financing into the digital age
                                                                        • TD Auto Finance partners with AutoGravity
                                                                          • AutoFi partners with Ford Credit and Chase
                                                                            • Tricor partners with AutoFi
                                                                              • Other Fintech Disruptors
                                                                              • Marketing Campaigns

                                                                                • Canada Drives: a Fintech solution for car financing
                                                                                  • Figure 11: Canada Drives mobile advertisement, July 2018
                                                                                • Mogo offers quick loans
                                                                                  • Figure 12: Mogo direct mail campaign, May 2018
                                                                                • RBC unsecured line of credit offer
                                                                                  • Figure 13: Royal Credit Line pre-approval email offer, July 2018
                                                                                • Carvana: “The New Way to Buy a Car”
                                                                                  • Figure 14: Carvana direct mail campaign, June 2018
                                                                              • The Consumer – What You Need to Know

                                                                                • Most Canadians own at least one vehicle
                                                                                  • Cash and dealership financing are the most popular payment methods
                                                                                    • Low monthly payments and recommendations are the top influencers
                                                                                      • Overall satisfaction with dealership financing is high
                                                                                        • Affordability factors are most important
                                                                                        • Car Ownership and Purchase Intention

                                                                                          • Most Canadians own at least one vehicle
                                                                                            • Figure 15: Number of vehicles in the household, May 2018
                                                                                          • Around half of consumers plan to buy a car in the next three years
                                                                                            • Figure 16: Car purchase intention, May 2018
                                                                                          • Younger consumers have a higher short-term purchase intention
                                                                                            • Figure 17: Purchase intention, 18-45s vs over-45s, May 2018
                                                                                          • Asian Canadians have a higher purchase intention
                                                                                            • Figure 18: Purchase intention, Asian Canadians vs overall, May 2018
                                                                                        • Payment Methods Used

                                                                                          • Cash and dealership financing are the most popular payment methods
                                                                                            • Figure 19: Payment methods used for last purchase, May 2018
                                                                                          • Women more likely to opt for dealership financing though bank/finance company
                                                                                            • Figure 20: Payment methods used for last purchase (select), by gender, May 2018
                                                                                          • Older consumers more likely to pay cash
                                                                                            • Figure 21: Payment methods used for last purchase (select), 18-44s vs over-45s, May 2018
                                                                                          • Parents with young children more likely to finance
                                                                                            • Figure 22: Payment methods used for last purchase (select), by parental status, May 2018
                                                                                          • Limited interest in using line of credit
                                                                                            • Figure 23: Attitudes related to financing preferences (% agree), May 2018
                                                                                        • Decision Factors

                                                                                          • Low monthly payments and recommendations are the top influencers
                                                                                            • Figure 24: Decision factors influencing financing, May 2018
                                                                                          • Younger consumers more reliant on recommendations
                                                                                            • Figure 25: Decision factors influencing financing (select), 18-44s vs over-45s, May 2018
                                                                                          • Familiarity is a key influencer for older consumers
                                                                                            • Around a quarter of car owners would like flexibility in payments
                                                                                                • Figure 26: Preference for financing that allows a flexible payment schedule (% agree), by age, May 2018
                                                                                            • Satisfaction with Dealership Financing

                                                                                              • Overall satisfaction with dealership financing is high
                                                                                                • Figure 27: Satisfaction with dealership financing, May 2018
                                                                                              • Older consumers are more satisfied
                                                                                                • Figure 28: Satisfaction with dealership financing (% satisfied), 18-44s vs over-45s, May 2018
                                                                                              • Older consumers more inclined to believe that dealerships offer the best deals
                                                                                                • Key driver analysis
                                                                                                  • Methodology
                                                                                                    • Terms of the financing offer is a key driver of satisfaction
                                                                                                      • Figure 29: Key drivers of satisfaction with dealer financing, May 2018
                                                                                                    • Clarity of terms and time spent by staff are among attributes that dealerships need to focus on in order to drive satisfaction
                                                                                                    • Interest in Financing Incentives

                                                                                                      • Affordability factors are most important
                                                                                                        • Figure 30: Interest in financing incentives, May 2018
                                                                                                      • Zero and low monthly payments are of more interest to women
                                                                                                        • Figure 31: Interest in financing incentives (select), by gender, May 2018
                                                                                                      • Older consumers more interested in zero interest and extended warranty
                                                                                                        • Figure 32: Interest in financing incentives (select), by age, May 2018
                                                                                                      • Low monthly, zero down-payment and vehicle return appeal more to lower income earners
                                                                                                        • Figure 33: Interest in financing incentives (select), by household income, May 2018
                                                                                                      • Financial incentives impact choice of car for around a fifth of consumers
                                                                                                        • Figure 34: Attitudes related to financing, May 2018
                                                                                                      • Newcomers and overwhelmed consumers represent a clear opportunity for dealerships to offer expert advice
                                                                                                        • Figure 35: “Automobile financing options are too complicated to understand” (% agree), by age, May 2018
                                                                                                    • Appendix – Data Sources and Abbreviations

                                                                                                      • Data sources
                                                                                                        • Consumer survey data
                                                                                                          • Abbreviations and terms
                                                                                                          • Appendix – Key Driver Analysis

                                                                                                              • Interpretation of results
                                                                                                                • Figure 36: Level of satisfaction with dealer financing – Key driver output, May 2018

                                                                                                            Auto Financing - Canada - August 2018

                                                                                                            US $4,395.00 (Excl.Tax)