In the Dealer Controlled Financing business, it is critical that we take responsibility for our customer and make sure we put them in the right vehicle with the right terms to help them succeed. The first step is to explore the customer’s needs and help them to select the correct vehicle for them. I’ll never forget the customer with a wife and 3 children, 2 still in car seats, who came on my lot to look at this really pretty red 2-door Cavalier I had in the front row. It took a little work but I convinced them this wasn’t the right car for them from a practicality stand point. We have all experienced having a customer purchase the “wrong” vehicle. They typically spend the entire term of the loan trying to get you to trade them into a different vehicle. If the vehicle is not right for them, they also are more likely to not pay as agreed or even return the car when it can no longer satisfy their needs. Helping your customer to select the vehicle that best meets their needs is the first time you must take some responsibility for your customers.
When your customers come on your lot they usually have three main questions:
- Can I get financed,
- How much down payment do I need, and
- What will my payments be?
Answering these last two questions is the next place we need to accept some of the responsibility for our customers. Dealer Controlled Financing customers are usually anxious, even desperate, to get a vehicle and will agree to terms they cannot afford. It is our job to make sure we are comfortable that they can afford the vehicle they are attempting to purchase.
Buy Here – Pay Here customers are typically not savers and often will not have a large down payment.
If a customer does not have the required down payment for a particular vehicle, it is important to try to work with them and see if there is a way to structure a deal that will allow them to buy that vehicle anyway. Some dealers use deferred down payments and some dealers have software that allows them to structure multiple payment streams on the loan so that the customer can make one or more larger payments at the beginning of the loan to make up for the down payment they lacked. This is a good practice but this is one of the places a customer will often agree to larger payments than they can reasonably afford. Make sure any deferred, special or ‘pick-up’ payments are actually doable for the customer. Otherwise you are setting your customer up to fail.
The same is true for the contract’s regular payments.
Our customers are usually not very good money managers and paying a smaller payment out of each paycheck is often easier for them than trying to save for 1 larger monthly payment. If you are not setting up your accounts with payday payments, I would strongly suggest that you consider doing so. It is critical to successfully collecting out an account that these payments be affordable. Our customers typically have a limited income and it is important to verify that your car payment will fit comfortably in their budget. Failure to properly structure a deal in a way that gives the customer the largest possibility to successfully pay off the account will increase delinquency and the amount of effort needed to collect your accounts.
Selling every car to any customer at whatever down payment and payment structure the customer will agree to will probably show high total sales and gross profit numbers but your collection expenses and charge-offs will also be high. If you take responsibility for helping your customer to succeed, you will not only experience easier collection and lower delinquency and charge-offs, but you will also have happier customers. That leads to more repeat and referral business. Put them in the right vehicle that meets their needs with a down payment they can afford and structure their payments to best fit their budget and the likelihood they will pay out the contract with minimal issues skyrockets. Remember, helping your customer to succeed will help your business to succeed.
