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February 3, 2020

Soft credit checks: the gateway to better outcomes

By Asena Degirmenci

Car finance is an important element of the motor industry. Over the years, millions of drivers have valued finance’s ability to spread the cost of a car over time, and into manageable amounts. James Fairclough, CEO at AA Cars, looks at the benefits of soft credit checks.

Although many UK drivers are familiar with car finance, they still find the process of securing finance for their vehicle overwhelming, and sometimes even intimidating.

However, it does not need to be, and this is where the importance of soft credit checks comes into play.

Despite the UK’s uncertain political and economic backdrop, demand for car finance remains strong. The number of used cars bought with finance rose by 8% in July compared to the same month in 2018, according to the most recent figures from the Finance & Leasing Association.

Car dealers and car selling platforms need to take advantage of the demand for car finance and be aware of the importance of soft credit checks, as many potential customers are put off when the words ‘credit check’ pop up on the screen. Even for those that have no reason to suspect there is an issue with their credit score, those two small words can fill them with unnecessary dread, so it is clear that soft credit checks are the way forward.

Leads into Sales

While offering soft credit checks will benefit your customers, it will also help your bottom line by attracting more potential customers and helping convert leads into sales.

In a time where drivers have more choice and easy access to a wide range of vehicles across the country, having a simple and transparent car finance application process, which offers a soft credit check in the first instance, can enable dealers to take potential car buyers out of the market quickly and secure a sale.

Transparency is key, and it works on three levels: customers need to trust your product offering, trust your price and trust the experience they will receive.

If a customer knows you are going the extra mile to make the car-buying process as easy and as hassle-free as possible for them, they are more likely to do business with you, and this applies to all areas of business.

With advanced technology at our disposal, there is no excuse for dealers not to go this extra mile for their customers. There is a significant opportunity for dealers to leverage technology to lead the way in a new era of financial transparency and turn their financing experience into a competitive advantage.

On a Mission

At AA Cars, we are on a mission to demystify car finance.

Last year, the Financial Conduct Authority highlighted the need for greater transparency, as it was concerned customers were not always able to make an informed decision.

It is vital to us that customers understand all the options open to them, both from a product standpoint and the impact it will have on their finances.

Ever since we launched car finance products, we have believed strongly that customers should be comforted by the ease of the application process as much as its speed. But just as crucial to us is that no customer should be adversely affected by any credit checks that are carried out.

For that reason, we chose soft checks to improve our customer experience. By using technology, data and sophisticated algorithms, our product includes personalised interest rates and the monthly payments motorists can expect if they proceed with an application. Where someone is not eligible, they are reassured by the fact their credit score has not been affected by these screening checks.

AA Car Finance gives access to soft credit checks both online and within the dealership environment. By providing soft checks online, customers know what they qualify for before they go to the dealership. This makes the whole process fairer for customers, who can visit a dealership with their eyes open to the potential costs and interest rates.

New Customers

The soft check has been particularly beneficial for those customers who are new to the world of car finance.

Without ever having gone through the process before, many are unaware of how much they could borrow and what repayments will look like. Some will want to test the waters to see if it would be a feasible option for them even before they have found the exact vehicle they wish to purchase.

The importance and benefits of offering soft checks are very clear to us. Our finance offering is built on trust and consumer confidence, and the soft credit check has provided a vital tool for reassuring customers right from the start of their car finance journey. This, in turn, has led to better outcomes for both our valued customer base and the business.

by James Fairclough

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