Americans spend considerable effort to save money but only 1 in 3 always look for better loans
October 14, 2015
CHARLOTTE, N.C. (October 7, 2015) - In a nationally representative survey of 1,024 American consumers, LendingTree found that 79 percent of Americans considered themselves bargain hunters. Nearly all Americans, 92 percent, have researched prices online before purchasing an item. However, when consumers were asked how often they looked for better prices when shopping for major financial loans, such as a mortgage or an auto loan, less than one-third, or 30 percent, of Americans stated they always look for the best rates. Roughly 18 percent stated they never looked for better rates or prices on loans.
Comparison shopping for loans has the greatest opportunity for consumers to realize substantial savings, yet most consumers seem to waive their right to shop around for the best deal or research available options.
“It’s an interesting phenomenon. Consumers are generally very savvy with their shopping behavior when it comes to day-to-day purchases and material goods. But, once it comes to a major financial investment, we see a collapse of the normally rational pattern of behavior and mentality for saving,” said Andrea Woroch, LendingTree’s consumer savings expert. “Consumers sometimes may be too focused on price and fail to consider the lifetime cost of interest which is really where banks and lenders make their money. Over a five-year auto loan, or thirty-year mortgage, a one percent difference between interest rates can easily translate to thousands of dollars.”
Its clear consumers want, and are very willing, to shop for the best price. Over half of Americans, 56 percent, state they have visited multiple stores to compare prices on a particular item. About 83 percent of Americans have used a comparison shopping website such as Amazon, Priceline, or Expedia. Yet, among those who do comparison shop online, only 14 percent comparison shop loan products. This list breaks down the frequency of which consumers regularly use online shopping sites for goods and services.
Frequency Which Consumers Regularly Use Comparison Shopping Websites For
Good or ServiceFrequency
Loans (Any: personal, mortgage, auto, etc.)14.23%
Even for small monetary amounts, Americans are willing to shop around. Over 80 percent of consumers stated they would go out of their way to save ten cents per gallon on gas. Yet, only 17 percent of car owners negotiated the interest rate whenfinancing a newly purchased vehicle.
“There could be a number of causes for this irrational behavior and it may vary among types of consumers,” Woroch continues. “One is simply that many Americans don’t understand the long-term costs associated with compounding interest and the time-value of money. Another possibility is that consumers are uneducated about loan shopping and the importance of comparing interest rates before financing a purchase. It’s easy to become emotionally involved with the purchase itself or to find the loan process so frustrating that you would rather finalize the purchase instead of shopping around. Unfortunately, consumers are becoming accustomed to paying a premium for convenience on a variety products we purchase every day, such as bottled drinks for example. But is the convenience of not shopping for loans really worth thousands of dollars? Perceived convenience is a major trap consumers can fall into, but with technology improving our ability to find the best deal, saving money on your major finances is just as easy as online shopping.” LendingTree looked at further consumer data to calculate the amount of money consumers could be missing by not comparison shopping mortgages. Based on the survey, about 32 percent of home owners looked at only one mortgage rate before buying their home. However interest rates offered to borrowers often vary from lender to lender. In Q3 2015, mortgage shoppers who received offers from at least two lenders through LendingTree experienced an average rate differential of .32 percentage points between the lowest offer and highest offer, a difference of $48.06 per month. Using this information, choosing the lowest offer could save a borrower roughly $17,300 over the life of the loan.
Methodology The 2015 LendingTree Consumer Shopping Behavior Survey was conducted online within the United States by SurveyMonkey on behalf of LendingTree between April 13 and April 19, 2015 among a nationally representative sample of 1,024 Americans ages 25 and up.