Although many car dealers are forecasting recession busting numbers in terms of point of sale finance penetration, others are saying that the lack of choice and flexibility from lenders is hampering growth and hitting profitability.
Customers who were a fairly safe bet for competitive finance rates last year are now considered a much higher risk as a result of lenders tightening up on their borrowing criteria and the restricted availability of wholesale funding.
Despite the fact that sales of new cars bought by consumers using dealer finance have grown for the first time since July 2008 (Motor finance sales show first increase in more than a year) many customers are still not being considered for headline rates and are choosing to either go elsewhere for a less expensive model; or continue in the car they already own, which again will only stall growth.
Whilst dealers obviously appreciate that lenders need to be reasonably sure that a customer is a safe bet for finance, many feel that the pendulum has swung too far the other way. Worse still, many sales people are spending lots of time with customers ensuring that they are going to buy the right car and negotiating a good deal only to find that the customer cannot get accepted on finance or is allowed a maximum advance which doesn’t stack up for the car in question. This in turn leads to disillusioned staff who are reluctant to refer buyers for financing figures and who inevitably end up cherry picking the blue chip ‘cash’ customers to the detriment of overall dealer profitability and the long term success of the business.
Clearly as the business pulls out of recession these incidents will hopefully lessen and as lender confidence returns then car sales will increase, but in the meantime if you are customer don’t be surprised if a sales person wants to “get you bought” on finance before going through the process of selling you the right car.