Are you sure you’re still catching up? More and more dealers are realizing that there is much profit in special finance lendingâ€”by simply acting as the third party to get people with bad credit financed or by directly providing them financing. Here are some facts to convince you that special finance is a where the most fish are right now.
A recent study by CNW Research showed that subprime buyers account for more than 20% of the total used-vehicle sales in July 2012. Meanwhile, the average credit scores for new cars and used cars dropped to 760 and 659, respectively, in the first three months of 2012, according to an Experian Automotive study. This means that more people with lower credit scores are getting approved for auto loans. The study also found that the number of loan programs offered to bad credit auto leads rose by 11%. It also showed that people borrow almost $26, 000 and more than $17, 000 at average for new car purchase and used car purchase, respectively.
These trends in the special finance arm of auto lending is fueled by the decline in loan delinquencies, according to some experts. The rates dropped by 7.6% and 12.1% for people who are 30 days and 60 days late, respectively. Vehicle repossession also dropped by 37%. These make special financing easier for lenders and dealers. On the other hand, as banks and other lenders offer lower interest rates and monthly payments, people with bad credit are gaining more confidence to take auto financing.
With these in mind, what should you do now to keep up with the competition? Here are some insights from experts:
It’s important to have the right process, the right sales team, the right inventory, and the right lenders to convert bad credit auto leads into sales. Firstly, having the right process involves doing away with the notion that when a lead does not meet your criteria, it shall be treated as chaff. Realize that there are many car shoppers who have bad credit who are still serious about buying a car and rich enough to make consistent payments.
Secondly, you must have a special finance department where your sales team are trained and experienced in negotiating with bad credit auto leads. Your sales team should understand their needs and dilemma to effectively turn them into sales.
Thirdly, if you are offering special financing, make sure you have the right inventory for it. There must be car models from 2001, for example, or those that are worth at least $8, 000, available in your car lot.
Lastly, you should have a network of lenders who are willing to buy special finance papers. And remember: Focus on helping your prospects get financed and not get the car that they want.Tags: bad credit auto leads, special finance auto leads, special finance leads, Subprime auto leads