RESEARCH on behalf of Angle Auto Finance is showing that car loan holders are taking a wide range of steps to reduce their household expenses by cutting things like subscriptions, delaying spending on costly items, looking for better deals on utilities and even considering additional casual work.
The research by RFIGlobal was presented recently at an online client workshop run by Angle using research between 2017 and 2022 of a cohort of customers who have purchased a car in the past two years and they used finance to fund that car purchase.
The research gives dealers an insight into how their customers who bought cars with loans are managing their cost pressures.
Anna Perera-Shaw, director of consumer credits, deposits and payments at RFIGlobal told dealers attending the workshop: “Something we can’t ignore is the landscape we are in now and with recent rate rises and inflation changing. Consumers are increasingly concerned about their personal financial situation and customers are becoming more price conscious.
Anna Perera-Shaw
Ms Perera-Shaw said that 45 per cent of car loan holders indicate they are highly concerned about inflation and the cost of living rising.
“Customers with a home loan are really feeling their repayments going up. This is something that is front of mind for them. They are aware of their costs and things are getting more expensive. There’s been media coverage around the rising costs of groceries and things such as petrol as well.
“So customers are aware of rising costs, they feel it, they are noticing it and it is something they are concerned about.
In terms of the actions they intend to take to help manage this we asked them if there is anything they have done to help save money?
“Typically, they are just generally trying to make an effort to save more or they’re reducing spending on non-essential items. For some customers, they’re delaying large purchases to save money or they’re looking for cheaper utilities.
“And it’s something we’ve been looking into in broader RFI research. Are our customers intending to take out a second job? Are they planning to sell assets? Are they planning to downsize where they live and sell their home; are they now taking those specific, more drastic steps.
“It seems that really the first steps customers intend to take is just generally trying to save more money and reduce discretionary spend. So they’re trying to make an effort with personal savings and spendings before they start changing their loans or trying to reduce that debt, moving money into different asset classes.
“It seems to be more like; can I save money in the short term on the everyday expenses, maybe canceling subscriptions and delaying large purchases or looking for cheaper utilities, but not necessarily trying to get out of, or trying to cancel their loans or taking out second jobs or anything like that just yet.
RFIGlobal data: Car loan holders very concerned about the rising cost of living are more likely than average to indicate the price of the car and running costs is important to them when choosing a car
Ms Perera-Shaw said that customers who are highly concerned about inflation and the rising cost of living are a lot more likely to say (54 per cent) that, when they purchased their car, the price was the most important factor they considered. But those saying they were not concerned about the cost of living, only 40 per cent cited that the price was the most important factor they considered.
“So over half of those who were highly concerned about the cost of living rising said the price was the most important area that they focused on when they bought that car. You can see compared to those who aren’t concerned about rising costs, it’s 40 per cent said that the price of the car was most important to them.
“There is also a high proportion of those who are concerned indicating they will focus on the running cost of the car. So they are more focused on the ongoing price and also the ongoing expenses associated with that car.
“Something that we’ve looked at in the past with the auto finance research is the extent to which customers think about the upfront cost of a car versus the ongoing expenses. Some customers really just think about how much the car costs to purchase versus others who just think about that overall longer term cost.
Anna Perera-Shaw presenting RFIGlobal data during the F&I panel discussion held by Angle Auto Finance at the recent AADA Convention. (L-R) Alex Farrugia, Evange Epa, James Nipperess, Anna Perera-Shaw, Toby Simmons
Ms Perera-Shaw said that in addition to the price of the car and running costs, the reliability, the size and the safety continue to be within the top five factors in the choice of a car to buy and that, over time, that the order of these items that stand out in terms of what’s impacting buyer choice of car, does not change.
“So price is always the most important, followed by reliability, size and safety. So those have remained within the top five throughout each year of this study,” she said.
And the other thing to know with this slide, if we just step back and look at it as an overall level, what’s most important to customers when they buy a car? Price of the car is important, but also the reliability, the size of the car itself, safety, and the brand reputation, you can see there are kind of a few options here that there’s not necessarily exclusively brand, it’s not necessarily exclusively price, there’s a few different areas,
“Turning to the extent to which car loan holders are researching interest rates before they apply for their loan, we are seeing an increase in car loan holders indicating that they conducted some research on interest rates prior to applying for their loan, or a significant amount of research.
“And the inverse of that is that customers have become less likely to say they didn’t do any research on interest rates prior to applying for their loans.
“So customers are more engaged with rates and they are more likely to be looking into rates before they apply for the loan. Whereas in the past, we’ve seen customers kind of just going for the application and seeing what happens but not necessarily doing extensive research first,” she said.
More than half car loan holders have made an effort to save more or reduced their spending on non-essential items in the past 12 months
Generally make an effort to save more
55 per cent – Have done this in the previous 12 months
36 per cent – I expect I will have to do this in the next 12 months
Reduce spending of non-essential items
52 per cent – Have done this in the previous 12 months
36 per cent – I expect I will have to do this in the next 12 months
Look for cheaper utilities
42 per cent – Have done this in the previous 12 months
32 per cent – I expect I will have to do this in the next 12 months
Cancel subscriptions
41 per cent – Have done this in the previous 12 months
30 per cent – I expect I will have to do this in the next 12 months
Delay large purchases to save money
38 per cent – Have done this in the previous 12 months
39 per cent – I expect I will have to do this in the next 12 months
Reduce loan/debt repayments
31 per cent – Have done this in the previous 12 months
34 per cent – I expect I will have to do this in the next 12 months
Transfer money into investments
24 per cent – Have done this in the previous 12 months
28 per cent – I expect I will have to do this in the next 12 months
Supplement your income through additional casual work
24 per cent – Have done this in the previous 12 months
32 per cent – I expect I will have to do this in the next 12 months
By John Mellor on 19th September 2023 Comment, Management Workshop, News Angle Auto Finance
The research by RFIGlobal was presented recently at an online client workshop run by Angle using research between 2017 and 2022 of a cohort of customers who have purchased a car in the past two years and they used finance to fund that car purchase.
The research gives dealers an insight into how their customers who bought cars with loans are managing their cost pressures.
Anna Perera-Shaw, director of consumer credits, deposits and payments at RFIGlobal told dealers attending the workshop: “Something we can’t ignore is the landscape we are in now and with recent rate rises and inflation changing. Consumers are increasingly concerned about their personal financial situation and customers are becoming more price conscious.
Anna Perera-Shaw
Ms Perera-Shaw said that 45 per cent of car loan holders indicate they are highly concerned about inflation and the cost of living rising.
“Customers with a home loan are really feeling their repayments going up. This is something that is front of mind for them. They are aware of their costs and things are getting more expensive. There’s been media coverage around the rising costs of groceries and things such as petrol as well.
“So customers are aware of rising costs, they feel it, they are noticing it and it is something they are concerned about.
In terms of the actions they intend to take to help manage this we asked them if there is anything they have done to help save money?
“Typically, they are just generally trying to make an effort to save more or they’re reducing spending on non-essential items. For some customers, they’re delaying large purchases to save money or they’re looking for cheaper utilities.
“And it’s something we’ve been looking into in broader RFI research. Are our customers intending to take out a second job? Are they planning to sell assets? Are they planning to downsize where they live and sell their home; are they now taking those specific, more drastic steps.
“It seems that really the first steps customers intend to take is just generally trying to save more money and reduce discretionary spend. So they’re trying to make an effort with personal savings and spendings before they start changing their loans or trying to reduce that debt, moving money into different asset classes.
“It seems to be more like; can I save money in the short term on the everyday expenses, maybe canceling subscriptions and delaying large purchases or looking for cheaper utilities, but not necessarily trying to get out of, or trying to cancel their loans or taking out second jobs or anything like that just yet.
RFIGlobal data: Car loan holders very concerned about the rising cost of living are more likely than average to indicate the price of the car and running costs is important to them when choosing a car
Ms Perera-Shaw said that customers who are highly concerned about inflation and the rising cost of living are a lot more likely to say (54 per cent) that, when they purchased their car, the price was the most important factor they considered. But those saying they were not concerned about the cost of living, only 40 per cent cited that the price was the most important factor they considered.
“So over half of those who were highly concerned about the cost of living rising said the price was the most important area that they focused on when they bought that car. You can see compared to those who aren’t concerned about rising costs, it’s 40 per cent said that the price of the car was most important to them.
“There is also a high proportion of those who are concerned indicating they will focus on the running cost of the car. So they are more focused on the ongoing price and also the ongoing expenses associated with that car.
“Something that we’ve looked at in the past with the auto finance research is the extent to which customers think about the upfront cost of a car versus the ongoing expenses. Some customers really just think about how much the car costs to purchase versus others who just think about that overall longer term cost.
Anna Perera-Shaw presenting RFIGlobal data during the F&I panel discussion held by Angle Auto Finance at the recent AADA Convention. (L-R) Alex Farrugia, Evange Epa, James Nipperess, Anna Perera-Shaw, Toby Simmons
Ms Perera-Shaw said that in addition to the price of the car and running costs, the reliability, the size and the safety continue to be within the top five factors in the choice of a car to buy and that, over time, that the order of these items that stand out in terms of what’s impacting buyer choice of car, does not change.
“So price is always the most important, followed by reliability, size and safety. So those have remained within the top five throughout each year of this study,” she said.
And the other thing to know with this slide, if we just step back and look at it as an overall level, what’s most important to customers when they buy a car? Price of the car is important, but also the reliability, the size of the car itself, safety, and the brand reputation, you can see there are kind of a few options here that there’s not necessarily exclusively brand, it’s not necessarily exclusively price, there’s a few different areas,
“Turning to the extent to which car loan holders are researching interest rates before they apply for their loan, we are seeing an increase in car loan holders indicating that they conducted some research on interest rates prior to applying for their loan, or a significant amount of research.
“And the inverse of that is that customers have become less likely to say they didn’t do any research on interest rates prior to applying for their loans.
“So customers are more engaged with rates and they are more likely to be looking into rates before they apply for the loan. Whereas in the past, we’ve seen customers kind of just going for the application and seeing what happens but not necessarily doing extensive research first,” she said.
More than half car loan holders have made an effort to save more or reduced their spending on non-essential items in the past 12 months
Generally make an effort to save more
55 per cent – Have done this in the previous 12 months
36 per cent – I expect I will have to do this in the next 12 months
Reduce spending of non-essential items
52 per cent – Have done this in the previous 12 months
36 per cent – I expect I will have to do this in the next 12 months
Look for cheaper utilities
42 per cent – Have done this in the previous 12 months
32 per cent – I expect I will have to do this in the next 12 months
Cancel subscriptions
41 per cent – Have done this in the previous 12 months
30 per cent – I expect I will have to do this in the next 12 months
Delay large purchases to save money
38 per cent – Have done this in the previous 12 months
39 per cent – I expect I will have to do this in the next 12 months
Reduce loan/debt repayments
31 per cent – Have done this in the previous 12 months
34 per cent – I expect I will have to do this in the next 12 months
Transfer money into investments
24 per cent – Have done this in the previous 12 months
28 per cent – I expect I will have to do this in the next 12 months
Supplement your income through additional casual work
24 per cent – Have done this in the previous 12 months
32 per cent – I expect I will have to do this in the next 12 months
By John Mellor
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