No Credit Approval
When dealing with a customer who was not able to receive a credit approval on the vehicle of their choice you will want to exhaust every possible option to help the customer. This can be a delicate situation to work with.
Typically a customer walked into the dealership feeling excited and left feeling slightly embarrassed. It is crucial to approach this situation with empathy and help provide additional solutions.
Asking for a Co-Signer
What is a Co-Signer?
A co-signer for an auto loan is someone who agrees to be responsible for the loan if the primary borrower fails to make payments. Essentially, they are providing a guarantee to the lender that the loan will be repaid, even if the primary borrower cannot fulfill their obligations. Co-signers are typically used when the primary borrower has insufficient credit history or a low credit score, making it difficult for them to qualify for the loan on their own. The co-signer's creditworthiness can help secure better loan terms, such as a lower interest rate or higher loan amount.
Word Tracks:
“In my experience, the best way for us to move forward would be to get a co-signer involved here. Do you have someone you’re close to that has decent credit like mom, dad or even grandmom that could help us out?”
“Hey Jake, having just you on the loan isn’t looking too good. Do you have anyone that could help you out?”
Thoughts:
Please note, it would be extremely distasteful to use this word track verbatim if the customer let you know their parents were dead during the showroom interview.
Generally speaking, a strong co-signer will help keep the interest rate down. This will make the payment more affordable and is a better situation for both the dealership and the customer.
Some things to keep in mind:
Yes this will effect the co-signers credit. Do not dance around this subject. It will help the co-signer if payments are made on time, but negatively if they are not.
This is a great way to help rebuild credit. The customer may be able to trade out or refinance without the co-signer in about 18 months.
A good co-signer means they have better credit than the customer. Two 400s do not make an 800.
Typically we can e-sign the co-signer so they don’t necessarily have to be local to the dealership or burden themselves with coming in for a few hours.
Word Tracks:
“Jake, I know you’re trying to get your first loan here, but we’re going to need someone to go on it to get you started. Can (alive) mom or dad help you out?”
“Honestly, I had a co-signer on my first loan, I built my credit then I leased my Camry on my own. It felt weird asking my parents, but it built my credit and now I’m way more financially independent.”
Asking for Money Down
Word Track:
“I spoke to my finance manager, and he thinks he may be able to get the bank to pick up the loan if you have a few thousand down, is there anyway we can get there? Maybe you could put a little on a credit card for now?”
Thoughts:
Generally speaking, if I am asking for more down, I received a number from either my desk or finance manager prior to making this call. That way I have more specific numbers to ask for rather then blindly requesting more money. More specifically, that sounds more like this:
Word Track:
“Hey Jake, I know you said you only had a thousand to put down, but even with our discount, the bank is going to need three. Any shot you can put the other two on a credit card or could ask someone to loan you the cash so we can help you out here?”
Thoughts:
Asking for more money down can help you leverage into another solution which would be…
Switching Vehicles
Word Track:
“After speaking to the finance department, it looks like our best option is going to be to switch to a vehicle the bank likes more to help pick up the loan.”
Thoughts:
Some vehicles look better to a bank than others. Use common sense here, if a vehicle has 300k miles on it, that vehicle is more likely to have issues and incur costs to keep the vehicle operational. Therefore if the customer is put into a situation where they have to choose between making repairs or making their monthly payment, a customer is more likely to fix the vehicle and delay the payment. This makes an older vehicle with more miles a riskier assets to provide financing for.
This is where having a good relationship with your finance manager or used vehicle manager plays a great role. They will be really helpful in identifying better options for the customer. Things to look for, but not necessarily stick by are the following:
Year- Keep this under 10 years, ideally, no more than 7 years old.
Miles- Under 100k keeps the bank away
Cost- If you can’t afford the 40k car, don’t look at a 50k car.
Identifying needs is also helpful in the switch. Find out which is more important, leaving in a car or leaving in a Range Rover? Pick an option that is most important to them, and use that to begin your search for the next vehicle you’d like to switch them to. For instance, if the customer has 8 kids, don’t try to shove them in a Corolla, but a Certified Highlander LE will probably be sufficient.
Word Tracks:
“I know you really liked the Challenger, but it’s just too much car and the bank isn’t going to help us out with that one, have you ever seriously looked at a Camry?”
“I know that Maserati you came in on was awesome, but the bank isn’t helping us out here. If I put you in that Corolla for a couple of years, you can probably save some money, build your credit, and when you come back our options are going to be way better.”
“Listen Jake, I know you really wanted that Supra, but is it more important to drive a Supra, or that we can get you driving?”
“Jake, I know you really liked the new Sienna, but I think we can get all of your kids in a Certified Highlander and keep you comfortable.”
“Jake, what did you like most about the Camry? And what if we can get you into something else with heated seats?”