Americans are far more likely to go out of their way just to save 10 cents on a gallon of gas than they are to shop around for the best rate on a home loan, a new study found.
The study, released last week by LendingTree, found that 79% of Americans consider themselves to be “bargain hunters” and 92% of Americans have researched prices online for purchasing an item.
But that bargain hunting ends for major financial loans, like cars and houses.
According to the LendingTree study, which is based on a nationally representative survey of 1,024 American consumers, 80% of Americans said they would drive further than normal to save a few cents on gas, while just over 14% of Americans said they regularly comparison shop when it comes to loans, whether they are personal, mortgage or auto.
“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 don’t see the same rational pattern of behavior and mentality for saving,” said Andrea Woroch, LendingTree’s consumer savings expert.
“Consumers may be too focused on price or the monthly payment and fail to consider the lifetime cost of interest which can add up quickly,” Woroch added. “Over a five-year auto loan, or 30-year mortgage, a 1% difference between interest rates can easily translate to thousands of dollars.”
LendingTree’s survey found that 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, only 30% of survey participants said they always look for the best rates.
Roughly 18% stated they never search for better rates or prices on loans.
The survey showed that generally consumers want, and are very willing, to shop for the best price.
Over half of Americans, 56%, said they have visited multiple stores to compare prices on a particular item.
About 83% of Americans said they have used a comparison shopping website such as Amazon, Priceline, or Expedia, but, among those who do comparison shop online, only 14% comparison shop loan products.
Below is a chart that breaks down the frequency of which consumers regularly use online shopping sites for goods and services, according to LendingTree's survey:
|
Good or service |
Frequency of comparison shopping |
|
Electronics |
67.63% |
|
Flights/Airfare |
67.50% |
|
Hotels |
63.82% |
|
General Merchandise |
51.13% |
|
Appliances |
45.79% |
|
Clothing |
36.30% |
|
Loans (personal, mortgage, auto) |
14.23% |
Woroch said there could be a number of causes for this “irrational behavior,” and the reasoning may vary among types of consumers.
“One is simply that many Americans don’t understand the long-term costs associated with compounding interest and the time-value of money,” Woroch said.
“Another possibility is that consumers are uneducated about loan shopping and the importance of comparing interest rates before financing a purchase,” Woroch continued.
“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,” Woroch said.
“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,” Woroch concluded. “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.
