The dealer/lender relationship is a part of the F&I process that can have an incredible impact across the board, from SSI survey scores to referral business and overall customer loyalty. But a quality partnership is not just something to foster for your buyer’s best interest—lenders profit when dealers help them secure quality loans, and dealers profit when lenders provide the right financing options that get buyers behind the wheel.
To keep that relationship working for both parties, every touchpoint must add value. With that in mind, it’s time to ask yourself if your lenders are the right ones for your customers–and your dealership. Here are the three questions to ask yourself to help decide if the right fit.
1. Does your lender fit your buyers?
First things first, your lenders need to work for your buyers. If approvals are few and far between, the fact is that partner may no longer fit the type of customer that comes to your store. The more flexible the lender’s programs, the more sales for your dealership.
Chances are, your customers have credit backgrounds of all shapes and sizes. It’s no surprise that after facing so many financial challenges in 2020, close to 20% of the market can be classified as subprime. If your lenders aren’t providing credit to these borrowers, that’s a considerable subset of your demographic that you can’t approve.
Stipulations vary by lender but can be another indication that the partnership isn’t right for your buyers. Are the conditions put on the loan approval necessary or even feasible for your borrowers, or are they more of a roadblock? Many lenders can automatically configure decision rules to evaluate down payment, debt-to-income ratios, and employment according to their in-house credit policies and lending practices and determine if they can structure a fair deal–without conditioning for burdensome paperwork.
2. Does your lender fit your dealership?
There are important things to consider beyond the rate of approvals you can get for your customers.
Are your lenders able to finance the inventory you have on your lot, potentially giving you an advantage over other dealers? If the answer is no more often than yes, it might not be the right partnership.
Do their rates help you compete with other dealers? In a tight market, buyers can turn their focus towards getting the lowest rate possible. Does your lender give room for negotiation? If you’re working with a subprime lender, are their fees aggressive enough to help you rival other dealers with comparable inventory?
A crucial but often overlooked part of any lender relationship is the speed at which loans are funded. How much time passes between closing a deal and seeing those funds transferred to your dealership? Does your lender offer digital contracting for faster transfer? How often do you see errors or missed documents that delay funding?
3. Does your lender help you optimize every sale?
The end goal may be getting your buyers behind the wheel with terms that work for them, but back-end performance is critical for dealers in a fiercely competitive market. Does your lender offer VSC, GAP, and other products to help you maximize profit on each sale?
These products do more than help you generate additional dealer profits per vehicle sold. They can also drive customer satisfaction by improving the buying experience and protecting your reputation should something happen down the road.
Dealers need lenders that can help them handle challenging issues and solve outside-the-box situations. When a contract is well-structured and incentives are aligned with both the lenders’ and the dealers’ goals, it’s a win/win. And once you’ve evaluated who you’re doing business with, letting those lenders know that they are your preferred partners brings even more value to the relationship—and can give you a bargaining tool.