Opening the Door to Profits
Gaining an increased market share of the financing opens the door to all other profit centers in the sales business office. Easy to say, hard to accomplish — unless the sales business manager sees the customer as soon as the sales manager has approved the deal.
Often, due to outside influences, a customer may indicate they will secure their own financing elsewhere or that they will pay cash for their vehicle. According to the Federal Reserve Board, 88% of Americans finance their large purchases somewhere. A review of the finance penetration figures from selected dealerships across the country shows our competition has been gaining. It appears that only when manufacturers buy down rates do dealerships enjoy a high percentage of finance deals. The figures also show a consistent correlation between the level of financing penetration and the number of service contract and aftermarket sales. Clearly, the data support dealer financing as the key to the success of all F&I products.
What is the situation at your dealership? Do sales and F&I support each other, or does each department operate on its own?
Some dealership personnel believe the press about a sales business office “staffed with unethical people”. While every industry has a few individuals who would do better to find employment elsewhere, for the most part, sales business managers are honest, hard- working people who conduct themselves professionally and ethically. To those who are reluctant to bring their customers into the sales business office, I suggest that you are allowing false evidence to appear real.
Many sales consultants merely present the file to the sales business manager after the customer has left the lot, with the delivery appointment already set. Granted, there are a few who have some degree of success selling financing over the phone. However, for the long haul, those who actually see the customer have the best chance for success.
The greatest benefit of dealer-facilitated financing is customer protection, since the lender uses only the title as security for the loan. Credit unions may offer a lower APR and accept additional collateral. However, they use present and/or future customer funds as the additional collateral. Credit unions can also accelerate the note for a long list of reasons, to include the one that raises a big red flag: “…. Or if they believe something happens which the credit union believes may substantially reduce your ability to repay what you owe.” (Source: Loanliners.)
With local bank financing, lenders have the right of offset. You will not see this clause in the contract. You will, however, find it in Terms and Conditions of Deposit Accounts, the booklet we all receive when we open our checking and saving accounts. When you read this clause, you will understand that local banks have access to all of their customers’ accounts. And more collateral means a lower APR.
These finance competitors will also offer the customer credit insurance and some sort of mechanical breakdown coverage. And some of your customers will buy from them because they do not know that better plans are available through your dealership.
I’m sure you’re beginning to see the point: A lower APR may not be the best deal for the customer. We must allow the customer to know what is at risk in every scenario. Only a professionally trained sales business manager is prepared to discuss the options that best suit the customer’s requirements.
Informed customers can make informed choices. Dealerships receive low CSI marks because their customers do not believe they were given a proper explanation of all the finance and protection options. Does the process you now use cost you financing and other lost income opportunities?
After 25+ years in this business, I truly believe that NO ONE CAN TAKE BETTER CARE OF OUR CUSTOMERS THAN WE CAN. All we need is the opportunity to visit with the customer before they make a decision to secure their own financing.