• News
    • Tech
    • Lifestyle
    • Business
    • Opinion
    • Premium
  • Reviews
  • Events
    • Nigeria
    • South Africa
  • Tools
    • Price Guide
    • Find your idea car
    • Car valuation
    • Sell your car
    • Car insurance quote
    • Locate a dealer
    • Deals
  • For Sale
    • New Cars for sale
    • Cheap Cars for sale
    • Bikes for sale
    • Trucks for sale
    • Boats for sale
    • Jets for sale in Africa
    • Cars under 5m
    • EV in Nigeria
    • EV in South Africa
Sunday, June 1, 2025
  • Login
Auto Journal Africa
  • News
    • Tech
    • Lifestyle
    • Business
    • Opinion
    • Premium
  • Reviews
  • Events
    • Nigeria
    • South Africa
  • Tools
    • Price Guide
    • Find your idea car
    • Car valuation
    • Sell your car
    • Car insurance quote
    • Locate a dealer
    • Deals
  • For Sale
    • New Cars for sale
    • Cheap Cars for sale
    • Bikes for sale
    • Trucks for sale
    • Boats for sale
    • Jets for sale in Africa
    • Cars under 5m
    • EV in Nigeria
    • EV in South Africa
Ask Autojorunal AI
No Result
View All Result
  • News
    • Tech
    • Lifestyle
    • Business
    • Opinion
    • Premium
  • Reviews
  • Events
    • Nigeria
    • South Africa
  • Tools
    • Price Guide
    • Find your idea car
    • Car valuation
    • Sell your car
    • Car insurance quote
    • Locate a dealer
    • Deals
  • For Sale
    • New Cars for sale
    • Cheap Cars for sale
    • Bikes for sale
    • Trucks for sale
    • Boats for sale
    • Jets for sale in Africa
    • Cars under 5m
    • EV in Nigeria
    • EV in South Africa
No Result
View All Result
Morning News
No Result
View All Result
Home Market

3 ways consumers overpay for car loans through price dispersion

David Ijaseun by David Ijaseun
March 30, 2023
in Market
0
3 ways consumers overpay for car loans through price dispersion
0
SHARES
5
VIEWS
Share on FacebookShare on Twitter

In the past few years, rising commodity prices have forced automakers all over the world to raise prices. Prices have also gone up because of growing demand from developing countries, higher taxes, and stricter rules.

Price dispersion is the notion that different people pay different prices for the same item. A study done in 2017 looked at 2.4 million car loans from 326 banks in 50 states. It found that 54% of people who got a car loan did not get the lowest interest rate.

READ ALSO

Moroccan automotive exports booms, sets new sales record!

BMW’s BEV sales surge, while PHEV drops in Q1 2023

The research looked at borrowers with the same loan terms, car values, debt-to-income ratios, commuting zones, and origination zones. The results showed that on average, borrowers paid 1.3 percentage points more in interest than the best rate. Because of this, most borrowers end up paying more than they need to because they don’t know that better deals are available.

People overpay for car loans for a number of reasons.

First, the high costs of searching make it more likely that people who don’t have many options, like those who live in rural areas with few banks and lenders, will take a high-interest car loan. According to the aforementioned study, borrowers in areas with high search costs usually buy a car that is three months older and worth $700 less. Also, the auto financing market is inefficient, and approvals can take a long time due to too much paperwork and worries about how credit checks affect credit scores.

Second, the markups that dealerships add can be too high. Buyers care more about the price of the car than the cost of financing. A 2019 study showed that consumers are willing to pay $1 more in finance charges for every $0.86 decrease in the price of the car. Dealerships are aware of this, and they use financing as an advantage. For example, a dealership may lower the price of a car for a buyer who finances it through them, since the markup on financing makes up for the difference. The study mentioned above showed that if dealers weren’t able to change loan prices, car prices would drop by an average of $350.25.

Lastly, many buyers don’t try to negotiate the interest rate on their auto loan. While 76% of buyers negotiate the price of the car with the seller, only 31.6% negotiate the interest rate on the loan. Also, even when borrowers think about financing costs, they often focus on the wrong metrics. The Federal Reserve survey found that 27% of buyers thought the monthly payment cost was the most important factor, while only 6.1% thought the interest rate was the most important factor.

In conclusion, it’s clear that rising commodity prices, more demand from developing countries, high government taxes, and strict rules have all contributed to the rise in car prices. Also, prices vary a lot, and many borrowers don’t know they can get a better deal, so they end up overpaying for their car loans. High search costs, high markups by dealerships, and a lack of negotiation skills have all contributed to this trend.

Taking care of these issues could help consumers make better financial decisions and save them a lot of dollars in the long run.

Tags: auto-financing

Related Posts

Moroccan automotive exports
Market

Moroccan automotive exports booms, sets new sales record!

July 5, 2023
The BMW i Vision Dynamics
Market

BMW’s BEV sales surge, while PHEV drops in Q1 2023

April 15, 2023
car assembly line
Market

5 countries with the most automobile firms in the world

January 14, 2023
Sport cars
Market

How important the car business is to an economy

July 5, 2023
Next Post
Virgin Orbit

Virgin Orbit shuts down operations due to funding challenges

POPULAR NEWS

Inferno at Toyota 1000 Desert Race consumes 49 cars

Inferno at Toyota 1000 Desert Race consumes 49 cars

July 3, 2023
Mobius Motors

Mobius Motors: Rising taxes, competition ends Kenyan SUV maker’s journey

August 7, 2024
Autojournal car race

Get ready for the biggest RACE show this December in Nigeria

August 12, 2024
From style to sustainability: How Geely Auto is shaping the future of luxury vehicles

From style to sustainability: How Geely Auto is shaping the future of luxury vehicles

October 25, 2024
Oyo State Governor gifts Saheed Osupa Toyota Prado SUV worth ₦70M 

Oyo State Governor gifts Saheed Osupa Toyota Prado SUV worth ₦70M 

August 22, 2023

EDITOR'S PICK

Uber

Poor service, local rivals surge threaten Uber and Bolt’s dominance in South Africa

February 26, 2025
Reliability or style: A showdown between Honda S2000 and Mazda RX-7 classic sports cars

Reliability or style: A showdown between Honda S2000 and Mazda RX-7 classic sports cars

January 18, 2023
Car fire

Highway hazards: What to do if your car catches fire while driving

April 16, 2023
Lufthansa Group

Labour strikes slash Lufthansa Group’s Q1 2024 earnings by $374.6 million

April 30, 2024

About

Auto Journal Africa is the leading online and print magazine for automobiles in Africa.

Follow us

Recent Posts

  • Toyota transforms RAV4 into all-hybrid SUV starting 2026
  • BMW reveals next-gen superbike concept with 230hp and carbon winglets
  • Tesla loses ground in Europe as EV rivals surge amid cooling sentiment over Model Y
  • Xiaomi rides high on Q1 boom, profits surge 65%

Links

  • Privacy Policy
  • About Us
  • Contact Us
  • News
  • Reviews
  • Events
  • Tools
  • For Sale

© 2023 Auto Journal

No Result
View All Result
  • News
    • Tech
    • Lifestyle
    • Business
    • Opinion
    • Premium
  • Reviews
  • Events
    • Nigeria
    • South Africa
  • Tools
    • Price Guide
    • Find your idea car
    • Car valuation
    • Sell your car
    • Car insurance quote
    • Locate a dealer
    • Deals
  • For Sale
    • New Cars for sale
    • Cheap Cars for sale
    • Bikes for sale
    • Trucks for sale
    • Boats for sale
    • Jets for sale in Africa
    • Cars under 5m
    • EV in Nigeria
    • EV in South Africa

© 2023 Auto Journal

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In