Interest Rate Objections
Before making this call please consult with your sales or finance professionals regarding the customers current credit situation. This will have a large impact on what interest rate the customer will be eligible to receive.
Your initial goal in this process is to contact the customer and thank them for taking the time to visit our dealership. Next we will want to highlight the key points in the showroom visit and confirm the vehicle is the right one for the customer . Once confirming this you will want to acknowledge the interest rate objection that ultimately prevented your customer from purchasing .
Thoughts:
We as a dealership do not dictate interest rates.
Interest rates are provided by financial institutions. They are dependent on many factors, the key conditions are the customer’s credit, the vehicle they are choosing, and the overall financial market. Your financial professional will do the best they can to provide the best possible approval in each situation, but ultimately it is up to one of our lenders to make the final decision on the interest rate. Explaining this to the customer should be rather simple it sounds like this:
“We at the dealership do not determine the interest rate you receive. We work with a bunch of different banks to help get you the best approval, but ultimately that’s going to be the bank’s call.
Financing with outside lenders:
If the customer is not willing to finance the vehicle through one of our lenders they are able to seek outside financing. We really don’t want to go this route, but at times it can be necessary for a customer to obtain a loan from their bank or credit union. Have a conversation with the customer around their rate expectations from their own lenders and communicate this with your manager. Starting the conversation sounds like this:
“We prefer you work with one of our lenders since it helps us make sure you’re working with a solid institution. I understand you think you can get a better rate through your bank. Have you looked into what they would offer on this vehicle? What the name of your credit union so I can pull it up and show my manager and have them call our lenders to see if we can get them to match it or do better.”
Refinancing:
Sometimes the customer’s credit is less than stellar and you’re going to be the first person to break this new to them. Additionally, the interest rate they agreed to is higher than our standard penciled rates. Explain the situation to the customer, this sounds like this:
“Listen Jake, your credit came back a little lower then you expected when we discussed this earlier, but we got you an approval. However, the interest rate is a little higher than we anticipated when we submitted the application.”
After you have broken the news to the customer and they begin to feel they can’t complete the deal, our long term solutions to the customer including refinancing the vehicle. After about a year to 18 months of making payments on time, the customers credit will improve (provided they pay all of their other credit driven bills as well). At that time, they could potentially trade out of the vehicle or refinance the vehicle and get a better approval. Discussing this option sounds like this:
“I know this isn’t the interest rate we were looking to get here, but this is a real approval and you can leave with this vehicle today. If you make all your payments on time, later down the road you can trade the vehicle in or refinance it to get a better approval. With either option, we’ll help you through it.”
Sometimes the customer has good credit and they just hate the interest rate. You can present refinancing a little differently to this type of customer.
“I know you’re used to getting better interest rates than this, but this is what it looks like for everyone right now. You can always refinance or trade your vehicle in when things loosen up a bit.”
Paying off the vehicle early:
Remember this line. “You only pay interest on the loan for the length of time you have the loan.” Remember APR means Annual Percentage Rate. Which means if you have a loan for 5 years vs the 6 they originally sign up for they will save a large amount of money in interest. They can do this by paying more than the monthly payment each month as well.
This will allow the customer to receive the benefits of financing vehicles, like for a rebate for a new vehicle, while still having command over their financial situation. The customer needs to keep the loan for 4 months to keep the rebates.
Ultimately, we do not really want the customer to do this. You should consult your managers and allow them to present this option, but you should be aware of the option and be able to set up the manager for this situation. This sounds like this:
“Paying a little more than the monthly payment that’s owed every month will help you save money in the long run. You will pay the loan off quicker and pay less money in interest as a direct result.”
“I know you don’t like the interest rate, and at that point you’d prefer to pay cash, but let my manager review this with you. He’s got a better handle on the other options we can work through to help you out.”
Ultimately, most of these options and thought processes should be discussed with a customer here in the showroom. If we got this far in the deal and this is what stopped it from moving forward, your follow up call is going to be focused around figuring out which option the customer feels like going with.
Get a co-signer:
Sometimes when a customer has challenged credit, we can get an approval, but the interest rate is too high for the customer to take the vehicle. Review the challenged credit customer to proceed with this topic.
Word Tracks:
“Hey Jake, thanks for coming by to check out the Sienna. Did you ever get in contact with your credit union?”
“Hey Jake, thanks for spending some time with me yesterday. I know the interest rate was the main issue for you, did you do any research into what alternative options look like?”