Guiding Your Buyer Through the Tough High Interest Rate Discussion in F&I

One of the most uncomfortable moments in F&I is the ‘high interest rate’ discussion. No one likes to deliver the bad news that a buyer’s credit is not good enough for OE interest deals or other A-paper finance options.

Buyers won’t understand and F&I managers always look like the bad guy. But it doesn’t have to be that way.

Here are 3 quick tips to help weather the high interest rate conversation and still come out ahead…

1)             Education is Key– The average age of the new car buyer is 36 years old and for most of their adult lives thus far, they have enjoyed the lowest interest rates in generations, many even ZERO interest. Your customer will not understand how the 0% they saw on TV equates to the 4-8% rate you have now quoted.Your F&I managers need the proper talking points to educate customers on how the math actually works. Let them know that even their local bank or credit union will likely have similar rates as well based on their credit and this is not a dealer ‘trick’. Rates are always higher for all those with challenged credit.Be ready to explain the role their credit plays in how much the bank or finance company will charge. Go easy as this part of the conversation can put some customers on the defensive.

2)             Be Ready with Options – Another option (if the interest rate your store offers is simply too much) can be to have the buyer check with their local credit union. Not ideal of course BUT more buyers belong to credit unions now and a strong F&I manager can potentially get enough room in a draft to add a VSC or tire & wheel.The important thing here is to let them know that you want to work with them to get them in the car they want with financing terms they can live with and sometimes that means taking a higher interest rate. Let them know they can usually refinance with their local credit union if they are a member. It doesn’t have to be forever.

3)             Offer Product That Makes Sense – Buyers will have to increase their down payment to keep the payment lower as a result of higher rates. Overall cost for the loan will increase. Loan terms will go longer.Strongly suggest GAP to help the buyer’s peace of mind in case the car is totaled by insurance. Make the case that with a longer term a Vehicle Service Contract would be important to make sure they are not paying for high repairs while STILL paying off the car.

Painting the picture of what it would look like to have an unexpected repair or total loss can help them see the true value of these products as a way to save them money while having to take a higher rate.

It’s never about making the buyer feel bad about whatever circumstance led them to having to take a higher rate…it’s about making sure they understand why and that they still have the same options as any other buyer regardless of the rate they have to take. Keep their dignity intact and F&I profits will follow.

date published
December 23, 2021

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