By Matt Barber, VP of Product, Lendbuzz
Anyone who’s spent time in a dealership showroom selling cars has had this same experience: a potential buyer comes in to look at the latest premium model, they spend time with the salesperson deciding the exact configuration and options they want, and during the conversation the salesperson must decide whether to invest time and resources on finding a viable credit solution or to “cut bait.”
Though alternative lenders may have programs that can help in such situations, there’s often an onerous underwriting process that’s fraught with complex verification work that may or may not ultimately lead to a firm loan commitment. This time-consuming verification process keeps the salesperson from working other potential sales, so they move on instead.
It’s true that auto consumers are as varied as the makes and models they shop for, but prejudging consumer loan potential based on “the old way of doing things” is a pitfall that can prevent your customers from buying the car they want (and cost salespeople sales).
The legacy auto lending industry required a FICO score and a social security number just to get started. Without them, the opportunity for a non-cash sale was all but dead, regardless of creditworthiness. But that’s no longer the case. Today, there are better loan products for consumers who make good incomes and spend their money responsibly, but whose creditworthiness isn’t reflected in traditional credit scoring metrics.
In many cases, consumers who fall into this category include immigrants who are just getting a footing in the United States. Because they may not have social security numbers or any existing credit, they won’t show up when you perform a traditional credit check. But they often hold high-demand jobs that pay good salaries. They have the means to take on a loan and make payments — just not a credit scoring model that accounts for it.
New lending products use proprietary algorithms to redefine true creditworthiness, regardless of whether the customer has a meaningful credit history, or any history at all. In fact, making use of these new products can often lead to firm approvals that offer better advances, more forgiving down payments and significantly better interest rates than even many customers with long credit histories can achieve.
And what’s more, new lending products take much of the onus off the salesperson and the F&I department and more meaningfully involve the customer in the approval process. Using their smartphones, customers can complete a simple income and credit verification process to finalize their applications. As a result, fast decisions and concrete approvals are the norm.
The added benefit is on the dealer side. Not only are more sales made possible, but F&I managers no longer need to suffer through the burden of a cumbersome verification process with uncertain funding delays and rejections.
The first step to capitalize on such a vast amount of opportunity for dealerships, salespeople and customers alike is to avoid the trap of ruling out a prospective buyer based on their perceived creditworthiness or an initial soft credit pull, and to consider every customer a viable buyer with a real ability to secure financing. The second step is to embrace the newest lending models and make use of them when the situation calls for it.
In the end, you’ll build stronger customer relationships, improve the dealership’s overall numbers, and reap the financial rewards that come with being a great salesperson who knows how to close the deal.
