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August 11, 2023

  • 4 Minute Read

Overcoming Car Buyer Hesitancy in a Period of High Prices & Increased Interest Rates

Canadian car shopper confidence has been increasing steadily, with purchase intentions continuing to rise since last year. But the car shopping journey and purchase process can still present certain challenges for buyers, and dealership operators who have an acute understanding of the drivers behind consumer hesitancy, will be well-equipped to help shoppers navigate purchase and finance options that work for them.

The findings from a recent DIG Insights research study, commissioned by AutoTrader, that surveyed consumers across Canada revealed that the intent to purchase a vehicle in the next six months reached 28% in May of 2023, up significantly from 24% in October 2022.

In the near term, 57% of respondents stated their confidence in their current personal financial situation is “Good” or “Very Good,” while 49% of respondents said they expect their finances to further improve over the next six months and 36% believe they will remain stable.

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But high vehicle prices continue to have an impact on car shoppers, presenting an opportunity for dealers to step in and handhold prospective buyers through the process. Of respondents who stated high vehicle prices impacted their vehicle purchase decision, 42% said they would delay their vehicle purchase, while 40% will spend more time comparison-shopping, and 36% will reduce their budget. Some 30% intend to compromise on the brand, model, or trim they initially wanted, while 23% would finance or lease rather than pay cash, and 22% plan to shift from luxury to non-luxury brands. Other mitigation options include travelling farther to buy an affordable vehicle or altering course from new to used.

When it comes to finalizing the deal, half of all vehicle purchase intenders plan to finance. Of those, 39% intend to use dealership financing, while 35% would get a loan from a financial institution, 16% would use their line of credit, and 10% their home equity line of credit. Only 37% of vehicle purchase intenders plan to pay cash, while 13% state they plan to lease.

New vehicle intenders are more likely to finance, at 56% compared to 44% amongst used car shoppers. Those looking to buy a new vehicle are also less likely to pay cash, and a mere 12% say they intend to lease, versus 16% of those shopping pre-owned offerings.

Dealers are encouraged to leverage these findings to help fine-tune their strategy. While many car buyers are intent on using dealership financing options, there are those that may be intimated by it – especially since, in their online vehicle research, they may come across social media personalities who “fish for clicks” by claiming they’ve unearthed common dealership tactics to pad contracts and prices. Dealers looking to bring more efficiencies, build more loyalty with consumers and tap into one of the largest automotive finance networks can lean on Dealertrack’s lender solution software for all the tools they’ll require.

Automotive dealerships can bolster consumer confidence in their purchase decision by identifying and explaining all finance options up front. Being flexible is also key. Understanding car shopper hesitancy and leveraging this knowledge to present a variety of options to prospective buyers, such as budget friendly models or different financing terms, is the path forward to ensuring customers can find a vehicle that aligns to their needs, rather than deferring the purchase altogether. And even if customers plan to use their own financing, it never hurts to run the numbers to see if you can offer payments that better align to their financial situation.

Dealers advertising on AutoTrader.ca have added benefits of providing transparency to shoppers through AutoTrader iQ Price Badges, an effective tool at identifying how each vehicle is priced compared to fair market value. Additionally, consumers can leverage the Payment Calculator on Vehicle Details Pages (VDP) to investigate their payment options ahead of connecting with the dealership, driving more informed shoppers to your lot.

Key Takeaways

  • High vehicle prices can impact purchase decision, but many car shoppers will entertain other options rather than defer their purchase altogether
  • Half of consumers plan to finance their car purchase, and dealership financing is a top choice
  • Most consumers are confident about their current financial situation, a key factor in their finance payment options
  • Being transparent with pricing and finance options can help bring confidence to buyers and seal the deal

Source: DIG Insights Car Shopper Perceptions & Intentions Research Study, May 2023, n=305

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