In this continual cost-of-living crisis, accessing competitive finance has arguably never been more important for car dealers and their customers. In this context, finance technology has rapidly become an essential facilitator. Richard Cox, head of operations at V12 Vehicle Finance, offers his view on how fintech can connect customers with cars.
While the automotive industry is generally lauded as a slick, well-oiled machine, when it comes to finance, the interaction between dealer and customer can often feel like a very delicate process. It is not uncommon for a dealer to be sat with a customer in their showroom while they agonisingly wait for a finance decision, limited by the number of suitable deals from a lender and stumped by red tape on credit ratings.
The result? A lengthy application process and the risk of a dissatisfied customer who had hoped to drive away on the same day.
Quite simply, this has to change. Financial technology, or fintech, has come on leaps and bounds and can enable dealers to get much quicker decisions from lenders as well as offer competitive finance to a broader range of customers.
The challenge is whether motor traders understand how they can use fintech to their advantage, and quite often, jargon and misgivings around this subject become a barrier to change, but here are some key areas to explore.
Often, one of the biggest challenges is the market itself. There are a large number of lenders proposing various solutions to dealers (and therefore consumers) but are not focused solely on their needs. Motor traders often find themselves needing a big panel of lenders yet are still unable to find the right product for the customer at the crucial time when making the sale.
To simplify the process, dealers should look for partners who can meet all their requirements. Some fintechs are better than others at helping motorists find products that fit their credit profile and enable them to drive away in the car they want with a loan suitable to their circumstances.
Ultimately, lenders should assist dealers with fintech and products that work in a waterfall-like fashion, cascading down a list of potential matches as circumstances require.
In other words, if customers don’t meet the criteria for a prime product, they are automatically offered the next rate for a near-prime product. The result is dealers do not have to resubmit the customer’s application, helping to save time and hassle.
Automated, end-to-end technology
Customers want a fast process. Knowing this, it is important to have agile and connected digital platforms to improve timescales.
One of the biggest stumbling blocks is often in assessing credit risk. Many dealers may still be using manual, antiquated processes to check the creditworthiness of customers, which may include the need to call up third-party companies and wait for updates on the status of their customer’s finance applications. This will require the hassle of waiting for all the evidence that the customer has provided the necessary documentation to prove that they are who they say they are.
However, there are now much smarter and faster ways to go about this procedure. Some quality providers can leverage the latest technology, including machine learning scorecards and automated income verification for a more streamlined service for dealers and customers, within a heavily regulated environment.
Another challenge can be when dealers are unable to work with different lenders because their Finance & Income (F&I) platforms are incompatible.
Technology can solve this, but it is a matter of knowing where to find providers offering fully-agnostic platforms, meaning the platform can integrate with all major F&I systems, making panel selection much more straightforward. This means that when dealers are choosing which lenders to place on their finance panels, they need only choose one without compromising the choice available for a variety of customers.
As an added consideration, we all recognise that paperwork should be a thing of the past. In today’s world, end-to-end technology is readily available so it pays to find a provider who offers e-signatures and an online customer self-service portal to bring speed and convenience for customers. This gives access to their account and allows them to view their outstanding balances 24 hours a day, seven days a week.
Faster payouts, speedier decision-making, better outcomes
At a time when many people may be struggling and worrying about credit, a long wait for approval on finance can easily sway their decisions and lead to them not purchasing, or not being able to get the car they wish. Beyond the sale, money management may be a struggle and without adequate ways to monitor outgoings, customers can fall behind on their repayments.
Some providers have automated up to 80% of their credit decisions and have experienced teams who can underwrite the majority of referred hire purchase (HP) and personal contract purchase (PCP) proposals. Also, over 90% of documents are turned around in under 25 minutes.
Dealers then receive a payout for these vehicles in under 10 minutes in many cases. Meanwhile, once customers have driven away happy, they have ways and means to track, manage and monitor their agreements, providing them with peace of mind.