Dealers seem to be of two opinions when it comes to consumer finance companies: some can’t live with them and some can’t live without them. While some dealers thrive without offering any financing, most dealerships could benefit from a partnership with a finance company. Because of the tumultuous nature of the financing market over the past two years, it is understandable that some dealers are wary of finance companies.
But as the economy improves and credit starts flowing again, dealers who embrace financing in this new economy can pull ahead of competitors and close more sales.
There are a few things dealers can do to make the most of their financing relationships. Any salesperson knows that price alone is not the most important thing when choosing a product or service, so dealers should not base their finance company decisions strictly on pricing. Rather, dealers must look at the value they are getting out of the programs and the relationships to determine what works best for them.
Dealers New to Financing
Dealers who are not currently enrolled with any finance companies should do some research first. Ask other dealers who they use and what they like or do not like about each company. Check out each company’s website and see what they have to offer. Then call the company and have a conversation. Can you reach a live person? Do they treat you well? Do you like what they have to offer? Do they do what they say they will do?
It is important to ask questions about what types of credit each company looks at, what kinds of fees you may be subject to, what the documentation requirements are, what the process flow looks like and what type of training and ongoing support you can get. Clearing up any questions before sending business to them will help dealers avoid surprises later. A finance company should be an important partner in the sales process, and the best ones can give dealers advice on how to approach finance sales, how to overcome objections and how to close more deals.
After doing the research, get set up with two or three companies. Each company will have different credit requirements, different program terms and different fees; having a couple of companies allows dealers to build relationships but still have options in case one lender says no. On the other hand, signing up with too many companies can backfire. Dealers who do not build a strong enough book of business or relationship with any one company will not earn any special consideration on those “iffy” deals.
After getting set up with some finance companies, dealers should periodically contact them to stay in touch. When new salespeople need training, or a salesperson’s current approach to offering financing is not working, a finance company should be able to offer some helpful tips. Finance companies do not succeed unless dealers do, so take advantage of their expertise to build a strong program.
Dealers Already Using Financing Companies
Dealers who frequently use financing probably have a few favorite companies, plans or programs that they use. But things in the finance world are changing rapidly, so dealers should call their finance companies and see what is new or if there is anything they can do to get more approvals. No one makes money if buyers are declined for credit, so the finance companies have a great incentive to help dealerships figure out how to make the most of each applicant.
Dealers also can improve their relationships and results by embracing the new realities of the credit markets. Lenders are still experiencing high delinquencies, foreclosures and write-offs, so anything salespeople can do up-front to help minimize risk will result in better approvals and lower overall costs. This includes things like making sure application information is accurate and makes sense, getting proof of income before submitting an application and making sure customers understand all terms of both the sale and the financing.
Getting accurate application information and proof of income will prevent any surprises during a verification call with a customer that could turn an approval into a denial. Buyer’s remorse is a huge cause of losses. No dealership wants its customers to be unhappy, so making sure they understand what the product does (and what the ongoing maintenance requirements and costs are) as well as understanding the financing terms, will help keep lender losses and dealer buybacks low, leading to lower overall costs.
All Dealers
Working with a finance company should be as much about the relationship as it is about the pricing. Finance companies should treat dealers and their customers well; in turn, dealers and salespeople should view finance companies as partners, not adversaries. There always will be issues that arise, whether on the front end in the application and funding process, or on the back end with customers who have buyer’s remorse. But building a strong relationship with finance companies puts dealers in a better position to negotiate, resolve future issues and earn special consideration when issues arise. Finance companies provide some great tools for any dealer’s sales arsenal, and dealers provide the loans that keep them in business. Building a strong partnership will help both sides prosper for years to come.
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