More than a quarter (27 per cent ) of consumers in Ireland with a car loan have no idea what interest rate they are paying on their motoring finance, according to research recently released by Volkswagen.
The research questioned consumers on motoring finance in advance of the launch of the 152 registration plate.
Looking at the demographics of who is borrowing to finance their motoring needs, 25 to 44-year-olds are most likely to have a car loan (20 per cent ) compared to national average of 17 per cent and just 12 per cent of 18 to 24-year-olds (I'm guessing many of those because they cannot qualify for finance ).
While car financing is most common between 25 and 54 year olds, once motorists reach 55 years of age, borrowing to finance a car drops to just 15 per cent. I'm sure that many are empty nesters (family grown up and moved out ), those with mortgages paid off and the last of the college bills paid, etc, who can save and pay cash for their cars.
Most car loans (51 per cent ) are for values of between €7,000 and €17,000. Just eight per cent of consumers borrow more than €20,000.
Commenting, Volkswagen Group Ireland CEO, Lars Himmer, said: “As the leading car brand in Ireland, we understand how consumers feel about motoring and we have put in place innovative finance solutions so Irish consumers can get more car for their money. Competitive options, such as PCP from Volkswagen Bank, have kept the Irish motor industry alive through difficult times and now the economy and the market is recovering, we are well positioned to deliver real value for Irish motorists. It is important that consumers are aware of what their car finance is costing them so that they can make the best purchasing decisions.”
Volkswagen tells us it will be offering customers more for their money on 152 orders with a range of additional extras, including free styling and technology packs and competitive finance offers including PCP from 1.9 per cent from Volkswagen Bank.
And the German carmaker says most models will also offer a lower APR when opting for a higher grade model with the 152 plate.
Since launching this offer in January there has been a significant shift in the grade of car chosen by Volkswagen customers. Taking all finance into account in 2014, 39 per cent of finance customers chose the Highline grade, whereas so far in 2015 this has risen to 58 per cent. The move is even greater when it comes to cars financed through PCP, which in just one year has risen from 46 per cent choosing Highline in 2014 to 73 per cent choosing Highline so far this year. One of the reasons behind this is that Volkswagen would like its dealers to have higher specification used cars to trade when they are traded back in to them.
When asked what interest rate they were paying, more than one in five consumers surveyed (21 per cent ) pay between four per cent and five per cent; more than one in seven (15 per cent ) pay between six per cent and seven per cent; and almost one in eight (12 per cent ) pay between two per cent and three per cent. When it comes to access to competitive interest rates, 18 – 24 year olds are the savviest shoppers with the majority (64 per cent ) paying less than five per cent interest.
The availability of flexible finance packages such as PCP is driving competitiveness in the car finance market and supporting sales in an industry which is still in recovery. It is clear awareness of PCP finance is growing among consumers, with 39 per cent of respondents saying that they are likely to look at it as a finance option for their next vehicle.
The majority (53 per cent ) of motorists say they know what their total motoring costs are per month and per annum, and almost a third (31 per cent ) would consider upgrading to a higher spec car if it could cut their running costs.