Attracting and retaining customers is one of the biggest challenges facing all auto dealerships.
Buying a reliable and long-lasting vehicle is one of the biggest challenges facing all potential shoppers. But, of course, the biggest appeal that can satisfy both buyer and seller is through offering financial options at an auto dealership.
Car dealerships have access to a broad array of financing institutions and options compared to potential buyers; it is possible to offer customer loans with lower interest rates and minimum payments.
Brief History of Auto Financing
You have to remember, auto financing was initially intended as a way for the common man to afford cars over the last 90 years.
Initially, bankers hated it and tried to ban financing on personal automobiles. Finally, however, a collection of automotive finance companies argued that it was critical to the American economy to permit lending, with each institution examining risk independently as it relates to automotive loans.
How In-House Financing Helps Auto Dealers
Here are the benefits of offering financing options at your auto dealership:
In an era of rising vehicle prices and supply chain issues, most people don’t have the cash to purchase their cars outright. However, financing through dealers can offer lower interest rates, via special promotional offers, that can get the rate to go as low as 0% APR.
By providing financing, you can make it easier for customers to purchase a vehicle. In addition, car dealers can attain a small percentage of the interest charged for the loan, providing an additional profit on the sale of the vehicle.
Let’s get this out of the way: it’s a complete myth that dealerships can add on as much interest as the market permits. Moreover, dealerships can make more money from extended-service contracts by serving as the middleman between drivers and auto lenders.
Finance managers at these dealerships should have a rule of thumb called the “300% Rule”. Pitch 100% of customers, 100% of the products offered, 100% of the time.
Dealerships make profits on their cut of interest rate; they make more off of profits in financing product sales.
Attracts More Customers
The rule of thumb: the more customers know, the more comfortable they are. 84% of new cars purchased last year were purchased with financing. Adhering to monthly payments and clear financing terms makes it easy and convenient for shoppers to discover the information they’re looking for.
Of course, offering to finance customers with lower credit scores or who may not qualify for traditional bank loans attracts in-store traffic. Still, auto lenders have strict limits on how much they can earn from a buyer’s interest rate.
Increases Customer Loyalty
When you offer to finance, you are providing a convenient and helpful service to customers. This can lead to customer satisfaction and loyalty. If a customer has a positive experience at your dealership, they are more likely to return and refer others to your dealership.
Personalization is critical; showing you’re consumers that you’re genuine and personable separates dealerships from banks or credit unions. In addition, dealerships typically have smaller staffs, so developing relationships between loan officers and shoppers can be beneficial.
Additionally, introducing digital retail to your dealership can allow buyers to quickly calculate monthly credit, apply for financing, select F&I products, and review and sign the final contract. Top desires that increase loyalty to a dealership include convenience, an ease of payment, and simplistic account management.
In offering financing options, the results may include enhancing the customer experience of your team. For example, providing a service that makes it easier for customers to drive off the lot requires a positive experience while in the building. In addition, ensuring your staff is knowledgeable about financing options and can answer any questions creates a positive experience with potential customers and encourages their trust in purchasing.
Transparency is key here; make sure all financing options are displayed digitally and in person. In addition, offering competitive rates will go a long way in uplifting shoppers’ spirits.
Again, it must be emphasized that financing through a dealership is about convenience. A finance manager submits information to lenders on a shopper’s behalf and discovers the best rate and terms. Everything — and we mean everything — is done in one visit.
The paperwork is filled out. Loans get approved. Deposits, if needed, are processed within the dealership. The consumer drives off the lot in their new car. All of this transpires over the course of a few hours. Loans are approved in just a few minutes; getting approved for a bank loan could take several days or weeks.
There’s also the convenience of flexibility. By providing a different plan that fits needs and budgets, the consumer will have peace of mind knowing that you’re looking out for their best interest. This includes loan terms, down payment amounts, interest rates, and monthly payment plans — all adhering to different circumstances that require necessary adjustments.