Computer still saying “no”

Despite the recent news that, according to the latest figures released by Finance & Leasing Association, the number of new cars sold on finance rose 3% in May compared to May last year, we are being told on a daily basis that finance declines are also on the up. We have heard of decline rates running at 20% and at a time when every deal counts it is costing car dealers dearly in potential lost revenue.

No one is arguing that criteria needs to be correct so that lenders are not reckless and borrowers can afford the repayments, but there seems to be a general feeling that good customers, who may only have missed or been late with the odd payment (and sometimes for very valid reasons) are being declined when they are perfectly capable of managing the loan and other than that have no particular adverse credit history.

If that isn’t bad enough because of the uncertainly over declining car values lenders will often only advance a certain amount on any given car meaning either the customer has to increase the deposit or the dealer needs to reduce the price on the car and sometimes a bit of both.

All dealers are asking is for a common sense approach to lending and not one which doesn’t allow for any kind of flexibility when it comes to looking at individual cases, especially given that there is an asset which is backed by the loan and so it’s not unsecured lending as in the case of a personal loan.

One dealer told us that his sales execs are so fed up with the “computer saying no” that they are getting turned off to offering finance which has become an integral income stream for the car dealer in recent years. If sales execs are deciding that spending long periods of time offering a professional buying experience and going through rigid sales processes with buyers only to ultimately have the deal turned down then that is clearly bad news.

Hopefully this will change and these things can tend to be anecdotal when things are quiet, in other words it seems much worse than it might actually be but certainly dealers need to keep[p the dialogue open with all their preferred lenders to ensure good customers are not going elsewhere for their funding solutions.