Over the past dozen years or so, traditional financing penetration into used cars has grown about fourfold. Consequently, dealers have recognized that more than half their customers for pre-owned vehicles will be closed by landing on what they consider a desirable monthly payment.
Understanding the affordability of shoppers’ cars of interest in both the online and brick-and-mortar showroom is essential in presenting that first pencil.
Cox Automotive reports that today the average car buyer spends nearly 70% of the total purchase process online, rapidly clicking their way to exactly what they want. Dealers need to be able to create a similarly seamless, transparent, and fast qualifying experience.
There is nothing more frustrating to both the customer and dealer than test-driving a car, then getting handed off to someone else to review their credit and income then desk the deal, only to be presented with a payment that does not work for their lifestyle.
The experience can be very time-consuming, especially when compared to the online process. When a negotiation needs to be restarted, the customer is likely to feel frustrated and unhappy.
The fact is, for dealerships, time is money, and it can be a challenge to ensure an efficient buying experience when shoppers don’t accurately report their income on the loan application. So it’s critical to understand a buyer’s legitimate financial capacity early in the sale—before the customer heads into the F&I office.
To facilitate this efficiency, dealers should consider leveraging tools that verify income automatically, or invest in a full suite of end-to-end tools that analyze employment history. Salespeople can often access these tools through the finance platforms dealerships already use.
Recent research by our company revealed that 27% of loan applicants misstate their income by more than 15%. Meanwhile, 15% of applicants overestimate it by 50% or more.
On the flip side, the research also showed that 20% of applicants understate their income by as much as 10% or more. These car buyers forget to include bonuses, overtime pay, and commissions when stating their income, and even their tenure at the employer.
In addition, the research found that consumers whose job tenure was one year or shorter were almost twice as likely to go delinquent on an auto loan as consumers with a job tenure of 10 or more years.
When dealers can quickly verify a buyer’s income, they can reduce the pain of a “big miss” from the desk, and confidently offer financing options customers while ultimately providing their lending partners with higher-quality financing opportunities.
In addition to confirming basic income and employment information, dealers can employ a full suite of end-to-end verification tools to provide additional insight into repayment risk beyond what a credit score alone reveals.
For applicants whose information is not available instantly, a researched verification can be immediately initiated, whereby a team of verification specialists will manually complete the verification on your behalf.
Income checks are an essential part of the loan process because they’re the best way to gauge a car buyer’s ability to pay. There’s no way to appropriately avoid this process.
When buyers misrepresent their income or have multiple, hard-to-verify income streams through the shared economy, it can be increasingly difficult for salespeople to put them in the right car with speed, confidence, and certainty.
Knowledge really is power when it comes to putting your customer in the car and loan that’s right for them. An educated dealer can build the best match for a consumer—frequently even better than what the buyer might be able to research online.
Car buying should be a dream come true for the buyer, and informed dealerships can deliver exactly that experience. In today’s short attention span society, where consumers expect instant gratification and satisfaction, anything that speeds up the car-buying process is going to be welcomed by buyers and dealerships alike.
Rather than leaving the customer feeling forced into a purchase, instant, reliable income and employment verification makes customers feel like the dealer is working on their behalf. When they go back online, they will let their friends know where to buy their next car.
With these verification tools in hand, dealers can build stronger customer relationships, as well as more profitable partnerships with their lenders.
John Giamalvo serves as vice president of dealer services for Equifax, where he oversees collaboration among top national dealer groups and enterprise alliances to provide auto insights and solutions to help dealers acquire, engage, and facilitate efficient transactions with consumers.0
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