Do You Know How to Apply for Vehicle Financing? (It’s Not Just You.)

I remember the first new car my wife and I purchased at a dealership. As young professionals, we were ready to make the leap from buying used vehicles, but what stands out is how little I knew about the car-buying experience, particularly when it came to financing. And I was a banker! These were the days before widely available internet research. We just walked into the dealership, talked to a sales representative and filled out an application then and there.

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Since then, certain things about vehicle shopping have become simpler, as the internet increased transparency and accessibility in car shopping. However, despite all the available information, plenty of people still sweat about purchasing a vehicle.

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Recently, our team at Ford Credit shared a survey of 1,000 American drivers. The survey asked a series of questions to gauge their knowledge and confidence regarding vehicle financing and how that knowledge stacked up vs. other topics.

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I’ve been in this business for 25 years. So you’d think I wouldn’t be surprised by what they found, but I was. Less than 40% said they could explain how to apply for vehicle financing. By contrast, almost 70% said they could explain how to bake a cake, and more than half correctly named the main characters in “The Office.” This isn’t just an American phenomenon. Our team ran similar surveys in the U.K. and Germany with similar results.

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As a provider of automotive financing, I look at this as a challenge. To help our customers make informed choices for themselves and their families, we want to ensure they are knowledgeable and confident about the topic. This is more important than ever for a few reasons.

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First, purchasing and owning a vehicle take a bigger percentage of household income. Since the onset of the pandemic, vehicle prices have trended up. The U.S. Bureau of Labor Statistics shows a 12-month increase in new vehicle prices of 4.1% in June 2023.

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Consumers deserve to be informed, confident and prepared when they enter the car-shopping process. Understanding the current market and setting a realistic budget are the first steps. It’s also smart to know how the terms of your loan will impact your monthly payment.

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To help offset higher price tags, some buyers have started opting for loans with longer terms. Experian Automotive’s Q2 2023 report said the average auto loan is approximately 68 months. In comparison, when my wife and I purchased our first new vehicle all those years ago, we selected a 48-month loan, which was typical at the time. That means the decisions many buyers make today will be part of their household financial picture longer.

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The way people are shopping for vehicles — and for vehicle financing — also has shifted. In the past, customers relied mostly on the financing experts in their local dealership to guide them through the process. I certainly did. Today, many customers are researching financing options online before ever stepping inside a dealership. In fact, our survey found that 34% of American drivers prefer to finance a vehicle online.

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While there’s nothing wrong with starting the vehicle-shopping process with independent online research, remember that financing experts are here to help. Using this key resource can ultimately save you time (and headaches). Ford Credit has a long history of going the extra mile to care for the customers who choose to become part of our family.

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This survey showed me that our efforts must start well before customers sign on that dotted line. Online financial education resources and in-person financial literacy courses continue to be important, and we have resources on our website. Keep an eye on the Ford Credit LinkedIn page for more insights from our survey. You and Ford Credit are on this journey together, and we’re here to help.