Prequalification Speeds Up the Purchase Process
8 out of 10 dealers say the sales and financing process should take 2 hours or less
A recent study by Deloitte looked at how dealers could improve the transaction purchase process to better address today’s consumers. It concluded that consumers want a quicker in-dealership experience than today’s typical process that takes more than four hours.
Dealers overwhelmingly share this sentiment: Eight out of 10 dealers surveyed by eLEND said that the ideal sales and financing process should take two hours or less.
The Deloitte study established that a key area for improvement is in F&I. It stated that 70% of consumers would welcome doing more of the deal online before the dealership visit, or prior to the text drive.
As a dealer, you know this is easier said than done. Complicated transaction regulations and limited technological options for online F&I are reasons why financing tools have been slow to move online, but habit is behind much of the resistance to starting sales and finance at the same time.
Historically, the F&I office has arranged financing and sold products almost exclusively as an in-store activity, insisting that F&I happen after the vehicle selection. As a result, the finance department operates in a silo, disconnected from the rest of the sales process almost by design.
First and second pencils are done without the involvement of lenders, leaving the door open for re-signs or rehashes after the customer has said “I’ll take it!” All of this adds time to an already lengthy sales process, directly correlating to a positive or negative customer experience.
Case study: Taking the challenge
California-based Huntington Beach Chrysler Dodge Jeep Ram was ready to “do things differently,” and charged staff members with finding ways to incrementally improve the sales process. They agreed that marrying more of finance and sales would positively disrupt the store’s transaction process.
When breaking down the typical meet-and-greet and test-drive steps in the store, they honed in on the driver’s license scan or copy: the first, information-rich touch point with customers. Although most dealerships check for a valid driver’s license before a test drive to protect against potential liability, many don’t treat this part of the process with as much consideration as possible.
Instead, they take a quick photocopy, scan it into a receptionist’s computer, or even do just a simple visual scan. Very few dealers use this prime opportunity to glean relevant customer information.
The Huntington Beach dealership was looking for a consumer-friendly, easy-to-implement solution that dealer personnel could adopt and be measured on. It already used a fairly sophisticated driver’s license scanning process to authenticate and cleanse customer data in an effort to eliminate ID fraud, and streamline the data flow to its CRM system.
Dealership employees realized the captured data was the same required by credit bureaus for finance prequalification, providing the potential for easy follow-up. Managing partner Pete Shaver explored solutions for implementing a soft-pull credit application (one that doesn’t affect a consumer’s credit) on the dealership’s ID scanner, and mandated the sales team to ask customers to opt-in for a credit app with no SSN required.
To the sales team’s surprise, more than half of its customers agreed to one-click prequalification when they understood there would be no inquiry on their credit report, and learned it could cut their time spent in the dealership. A win-win.
Shaver discovered that prequalification prior to the test drive alleviated data fragmentation, disconnects, and bottleneck headaches between sales and finance. It also gave the salesperson and finance manager new levels of transparency into the buyer.
Another interesting discovery: These customers had, on average, a credit score of more than 704, and were serious, qualified buyers coming in for a test drive, ready to drive off in their new car.
And closing ratios proved this point: 54% of customers who agreed to prequalification before the test drive went on to buy. This compared to a 34% closing ratios for customers who ended up buying without the pre–test drive prequalification. In short, customers who prequalified before the test drive were 56% more likely to buy.
“These aren’t customers who are questioning their creditworthiness, these are customers who are ready to buy—today,” said Shaver.
Six months later, the results of prequalifying are staggering. Shaver said deals come together more than an hour faster than other deals in the store, and closing ratios for these customers have increased by 150%. These results are coupled with more than a $300 increase in profit per vehicle sold and CSI scores that average four points higher on deals.
It’s clear that Huntington Beach Chrysler Dodge Jeep Ram was up to the challenge, and successfully found a way to shift part of financing to the front of the purchase process. “A 60-second process change reduced our purchase transaction times by 60-plus minutes,” concluded Shaver.
Pete MacInnis is founder and CEO of eLEND Solutions, a company focused on providing a more efficient sales and finance process for the entire automotive industry. eLEND Solutions’ patented platform streamlines car selling by bringing more functionality online. The company’s suite of products includes CreditPlus, ID Drive, and MOBILOT.