Lenders Tightening Credit Means Offering More Choice
You would have to go back to early 2008 to see a tougher year for car lending than 2022 has been. Good thing it’s in the rearview, huh?
Seven consecutive rate changes this year from the Fed has dramatically slowed auto lending and made it difficult for borrowers in the near-prime and subprime groups to jump out of the market altogether. In fact, it was harder to get a loan in November of ‘22 than it was just a month prior in October.
Credit has tightened sharply in the last quarter of 2023 due in large part to fears of a recession and a prediction that the prime could top 5% in ‘23. No proof that will happen but financial gurus have been saying the ‘sky is falling’ for months now.
The lending channel that has tightened the most may surprise you. According to a Cox Automotive study, credit unions saw loan approvals drop the most. That can be a bright spot for dealers that find it tough to compete with CU’s in their market. Conversely, independent auto finance companies saw their approvals rise in Q4 of ‘22.
And that’s where the opportunity is for dealers who recognize the need to look beyond the one or two lenders they favor, especially if one of them is the local indirect CU relationship. If they are clamping down, it’s time to cast a wider net.
Lending Options Mean More Now
With consumer sentiment dropping another 2% in November, it’s important for dealerships to begin to think about being able to offer their buyers the maximum amount of finance options available.
TransUnion is predicting a rise in auto lending in 2023 and if they are right, being able to offer customers more options will be a critical strategy for increasing F&I profits after a dismal couple of months.
truFinance, powered by truWarranty, helps make casting that wider net easier by connecting your store to more indirect financing sources for your customers. For FICO’s 640 and above, you will have a host of indirect finance companies ready to help.
All within one F&I menu, you get:
- Up to 5% dealer profit aid and low rates.
- Up to 125% LTV of NADA retail plus room for VSC and GAP (bonus!)
- Aggressive allowances for ancillary products (double bonus!)
- And immediate integration with Route One and DealerTrak
Borrowers Need Help
By offering a wider selection of local finance options, your buyers will get a better shot at a payment they can afford for terms that match their unique situation. The last year has seen the average monthly payment for used autos alone soar to almost $500 per month. That alone is enough to scare off buyers from even trying.
Being able to find the right lender with a rate/term that works can help make your dealership stand out as one that believes all car buyers deserve a shot at driving a great car off the lot.
Today’s dealership challenges are many…lingering effects of inventory shortage, rising rates, and consumers taking themselves out of the car buying market. But having more finance options in-house brings a little bit of control back into F&I by being able to better serve your customers with the choices they need to make a deal work in this climate.
Give us a shout here at truWarranty to let us show you how easy it is to connect with more lenders to help your customers find the best possible rate & term.
F&I managers have one of the hardest, if not THE hardest, job in today’s dealership. Ask anyone who has ever been in ‘the box’ what the one word is that can describe their job and they will likely say ‘pressure.
Your buyer's identity can be stolen from mishandling of documents during the course of a deal. Dealerships can also fall victim to one of the most common forms of fraud, fake identification scams.