The finding was a new high for the survey series. This sentiment could owe partially to consumers who were already concerned with rising debt levels. FICO recently reported that the average credit score, while still robust at 717, had declined for the first time in a decade, dropping a percentage point due to increased credit delinquencies and increased credit utilization.

With consumers feeling the pinch of increased credit use and continued high automobile rates (for example, the average rate for a new car loan with a 60-month term was 8.22% as of February 2024)- bank auto lenders have increasingly turned to pre-qualification options. This functionality offers consumers a way to determine if their auto loan applications will be successful and to ballpark the amount they may qualify for (an important piece of information in this age of higher sticker prices), before undertaking a full application. Some of these lenders are going further and giving consumers a window into their potential loan rates (APR) and monthly payments within their pre-qualified car shopping experience, all without impacting their credit score through a hard inquiry.

Image on left with down payment of 3K, right image down payment 10K

This level of detail provided to a shopper in market for both a vehicle and financing can potentially aid bank lenders in re-directing shoppers from seeking financing at the lot, where manufacturers and dealers, not subject to the same capital management requirements as banks, can be a competitive alternative for loans.

As of Q4 2023, four of the top banks that offer auto financing that Comscore tracks offered auto loan pre-qualification onsite to either the general public or their own customers.

So, are consumers using these pre-qualification options? Looking at activity from Q1’23 to Q1’24, the volume of pre-qualification starts and completes have increased Y/Y, up 25% and 53% respectively, while the conversion rate (started applications to completed applications) has improved from 36% in Q1 2023 to 44% in Q1 2024.

Key Takeaway

Looking ahead, recent signs are that car prices are cooling as of Q1 2024 which may unlock additional auto lending demand, but consumers continue to face financial headwinds. In the current lending environment, bank auto lenders will likely continue to look to put information in the hands of consumers earlier in the shopping journey by offering them risk free guidance in the form of pre-qualification.

To continue the conversation about auto loan pre-qualification or how auto lenders differentiate themselves in the market, contact us here!