We are currently feeling the pinch in terms of the credit crunch as everybody knows, however have you ever stopped to think how that affects our business on the front line? Let me explain what is happening across the trade at present.
All major finance companies are tightening their lending criteria, i.e. the rates are not as good and these companies are going for ‘blue chip’ customers, those with a very high credit score with no missed payments or defaults. Unfortunately customers who fall into other categories are either being declined or being asked to pay much more interest on their potential loans or are being asked to provide a much larger deposit.
The result is that monthly new and used car sales are down in some cases by as much as 40% because customers are reluctant to change their car if it’s going to be much more costly.
I heard of a dealer recently who would usually expect to have 2-3 finance declines per month but has had 18 in the last 2 months alone! The potential income streams from 18 sales with add-ons amounts to a serious case of lost profit opportunities and if this pattern is being mirrored across the board (as we can only assume it is) then this points towards tougher times ahead and, from a customer’s point of view, much more shopping around for the right financial package before making that purchase.