Kelly’s Korner: Securing Larger Downpayment
Q. How can we secure a larger down payment when the customer is tapped out?
A. As we all know a down payment is vital when shortening the trade cycle and when past credit lacks the luster of a 700+ beacon score. You might want to review the finance contract on the trade-in vehicle. Did the customer purchase a service agreement on their trade? Is the policy still in force? How about credit insurance? Is that product protecting the loan on the trade vehicle? If so, you can cancel these products and apply the monies to a down payment on the new vehicle.
Credit Life insurance is cancelled according to the rule of 78. Disability insurance is also refunded according to the Rule of 78, except in the states of Oregon and California. In these two states, disability policies are refunded according to the Rule of Anticipation.
Service contract refunds are generally done pro-rata time or pro-rata miles. The refund amount is the lesser of the two calculations.
After your initial refund calculations, you can fax the amounts to the service companies for verification and processing. Ask what you can do to expedite receipt of the amount to the payable refund.
Q. How important is the interview process regarding the trade vehicle?
A. The trade vehicle interview is as critical as any other interview in the deal. Most customers want full retail for their trade-in, and they usually want to purchase the new vehicle at a wholesale price. We need to be especially attentive to asking about maintenance records on the trade. We also need to secure a copy of those service records. Factory warranty and service agreement companies are now requiring proof of service to authorize claims. They are especially looking for verification of the 30K, 60K, and 90K major services. Without this documentation, claims will be denied. For motorized units, we need to ask if the emission system is fully operational. Is the mileage accurate, or are the true miles unknown? We should also inquire about protection policies on the trade-in. With each negative response the customer gives, the value of their trade is diminished.
Q. My dealership does not pull credit reports on our clients. Why do we need to sign up for that extra expense?
A. During the course of negotiations, the customer will usually ask about payments and the APR. When you do not pull a preliminary credit report, your staff may quote an APR the customer may not qualify for. In view of the current concern about leaving too much room in the APR, it is prudent to view the client’s credit in order to know the lender’s terms.
A sales business manager who sees the customer’s credit report is better prepared to conduct the credit interview and determine the reasons for any derogatory credit appearing on the report. The manager should also view the same report the lender’s pull. The lender should not find any derogatory information on the bureau that the sales business manager is not prepared to discuss.
By knowing the credit score ahead of time, the manager can save valuable time by routing the application to the lenders who are in a position to give the quickest approval. This proactive style will enhance the dealer-lender relationship. You will save the lender’s operating costs by submitting applications that fit their credit criteria and eliminate the practice of shot gunning applications to every lender at one time.