Primetime For Sub-Prime
Sub-prime deals bring with them a unique set of challenges. Whether it’s finding reliable lending, getting an advance for back-end products or simply working the deal to get a monthly payment your customer will agree to, there are plenty of reasons to tread lightly. But if you look closely, you’ll see that the time is right to strike it big in the sub-prime market.
Consumer confidence is riding high. Several reports released recently show that overall consumer confidence in the United States is approaching high-water marks not seen in decades. The Conference Board Consumer Confidence Index, the Present Situation Index and the Consumer Confidence Survey all returned results that are nearing peaks they haven’t reached in almost 20 years.
Default rates are holding steady. A good indicator of how sub-prime customers are faring is how default rates move throughout the year. This year, even outside the automotive industry, default rates have remained in acceptable ranges as customers continue to stay current on their loans. For credit cards, cars and mortgages, default rates are right where many economists expect them to be for this time of year.
Availability of lending. Some big players may have backed out of the sub-prime lending space in recent months and years, but this could spell more opportunity for the dealers willing to seek it out. With big national names backing off this market, it opens the door for local and regional lenders who know the sub-prime market well and understand how to successfully navigate these deals. These lenders will understand the value of back-end products to keep a customer on the road and will give you fewer headaches over including room for such products on your sub-prime deals.
Availability of back-end products. Once you’ve landed reliable lending that understands the value of a VSC on a sub-prime deal, it’s all about finding the right product. Some lenders may have one in mind that they prefer, but if you’re seeking it out on your own, you’ll be quick to find reputable providers that can provide quality coverage on vehicles with starting mileage as high as 200,000 miles. These providers who specialize in high-mileage inventory will have the products designed to fit your sub-prime audience.