Kelly’s Korner: How do you rate?
Q. How do you address the issue of interest rate when you are in F&I?
A. Interest rates are a primary concern for everyone involved in a major purchase. The vehicle industry and its allied partners have made interest rates a focal point for consumers. Lenders address interest rates when they design reserve programs. Dealers often feature interest rates in their advertising. The F&I manager introduces interest rates to the customer.
Current rates are at some of the lowest levels we have seen in many years. And a consumer’s repayment record typically governs the rate available to them. People who pay their bills on time earn lower interest rates. They are less likely to default on a loan because they have demonstrated a history of repayment. Conversely, consumers who have a history of late payments represent an increased credit risk and typically pay higher interest rates.
Is there a better interest rate available to the customer than the rate an F&I manager offers? Almost always the answer is yes. However, collateral often makes the lower rate possible. When a credit-risk customer qualifies for a lower interest rate, it generally means property other than the vehicle title will secure the obligation. Does the consumer have the time to shop for the lower interest rate? And do they have the collateral security the lender may require?
Dealerships offer their customers one-stop shopping and an opportunity to purchase a vehicle with only the title as security. If rate is a big issue to you, it will be a big issue to your customer. If the number is normal to you, it will be normal to your customer. We often create our worst objections by planting our own buying habits in the minds of our customers. Remember that we buy wholesale. Thank goodness our consumers purchase retail.
Kelly’s Korner, OIADA Newsletter, December 2003, P. 11