Helping Buyers with Realistic Payment Expectations Starts Early, Not Later

The last few years have arguably been the most challenging that both dealers and car shoppers have ever faced. Inventory in short or non-existent supply, rising interest rate in response to 40 year-high inflation, and now both new and used car prices seeing unprecedented increases. It’s enough to make the most hardened consumer throw their hands up in frustration.

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At least two of these factors are having a deeper effect in F&I…rising rates and prices that lead to payment affordability issues. Borrowers are looking at less payment flexibility and having to jump through more hoops now to make a deal on the car they really want. The headwinds are, for some, too tough to overcome.

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And yet many dealerships are still using old sales tactics of having the customer pick out the car they want first before drilling down to be sure that they can afford the payment. But this is ultimately a disservice to all car buyers. Here’s why…

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Unrealistic Expectations Hurt Deals Later

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Salespeople cannot assume that every borrower has the credit to put together a deal on the car they pick out online or on the lot. Realistic and open conversations must happen beforehand to ensure that the deal sent through to F&I is doable and can easily get approved.

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It’s no different than if you’re buying a house. One of the very first things your realtor will do is walk you through a pre-qualification process including a hard credit pull and an examination of debt/income. You will know exactly how much house you can buy before you ever walk into a listing for sale. Your realtor does this for two reasons…one, to not waste your time of theirs with trips to houses you can’t afford and two, to focus your expectations on the right price point. 

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They want to help you get a great deal but it must fit what the mortgage companies are willing to lend based on your unique financial situation. Uncovering that after picking out your dream house leads to disappointment and frustration.

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The same can happen when the financial discovery happens after your customer picks the car they want, not the car they will get approved for by the bank.

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A Few Tips to Avoid Deals Going South

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Not every deal has to sit on thin ice waiting for it to fall apart in F&I…let’s look at a few simple strategies to help avoid the deal-breaking payment letdown…

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• Start from the Beginning - If your dealership website doesn’t have a payment calculator, add one. If your buyers see the ability to enter the sales price of the car they want, they are more likely to use it to see if the payment they feel they can stomach is even realistic. This gives them a confidential way to avoid the uncomfortable conversation in F&I when they are told ‘I’m sorry, we can’t approve you for that car.’

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• Don’t Assume Everyone is Prime - The latest data from Experian showed that in Q4 of 2021, 65% of car shoppers had a 661 credit score or above. But the bad news is that it means 35% of car shoppers did NOT have good credit and would be destined for subprime financing. That usually means not being able to get the car they really want. 

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Consider doing a soft pull of their credit first before they get their heart set on a particular vehicle that may not meet their true financial capability. It won’t impact their score but can give your sales team a better idea if the car they came in on is within their reach.

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• Ask the Right Questions - This point should go without saying but some salespeople can get so excited to have a motivated buyer (especially these days) that the little things can get overlooked. Have the sales team ask if there are ‘back-up’ choices for vehicles in case the one they came in on doesn’t work out. Ask about money down and if financing has been secured elsewhere. Some may not want to share that but it’s worth asking.

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Don’t be afraid to ask buyers if they have any idea what their credit score may be. Younger generations tend to use apps designed to give a broad score to encourage keeping an eye on their financial health. Who knows…they may pull out their phone and show you. Crazier things have happened on a dealership lot, right?

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With a difficult financial environment out there for car buyers, it’s important to be ahead of affordability issues rather than having a deal unravel late in the game when it didn’t have to. Knowing the payment they can afford early in the process helps your sales team direct them to the model that is the best fit for them without the dealership looking like the bad guy. It’s about managing expectations early to avoid ill feelings later on.

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If your dealership is struggling to find local financing sources for buyers that can help give your F&I team more flexibility, reach out to truWarranty today to take a closer look at truFinance. Our platform connects your dealership with finance companies that can expand the choices your F&I team has when finding the most creative way to get people down the road in the car they need at a payment they can afford.

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