Minimal Savings Can Maximize Auto Sales

$50 to $150.

Dealers who think that monthly savings are inconsequential to customers need to look at TransUnion’s just-released Mortgage & Auto Loan Refinancing Survey. Of course, dealers don’t refinance (or finance) loans, but the lenders they work with do. And the findings of this survey underscore the importance of F&I managers forging solid relationships with lenders who offer competitive rates at the initial transaction and later.

“What’s important for dealers is to be aware of our survey data,” Satyan Merchant, senior vice president of automotive for TransUnion, tells WardsAuto. “Consumers are looking for ways to save money. The top line is that, in general, consumers feel that there’s personal strain going on in their lives and in their worlds. Dealers should be aware of that mindset.”

Besides forging solid relationships with nonprofit credit unions and other lenders that traditionally offer low financing rates, dealers can employ other buyer incentives. The TransUnion report shows four in 10 survey respondents offer current auto-loan interest rates of 4% to 7.99%. About 25% of respondents have loans with 8% to 12% interest rates.

As we’ve reported, Urban Science data shows that just a $35 incentive — how it is tendered depends on the dealer — entices consumers to take test drives. We’ve also reported on experts’ advice that salespeople tell consumers not just the manufacturer’s price of a vehicle but overall savings, including incentives, fuel and tax breaks.

Of course, those discussions and incentives won’t erase high-interest rate concerns, but the $50 to $150 monthly saving can move consumers’ needles toward purchases, according to TransUnion data. And F&I managers working with lenders on behalf of consumers can also make dents in consumers’ financing costs.

“If there’s a way you can figure out what a consumer could stand to save from a monthly payment or an Annual Percentage Rate (APR), if you could put forward a very good, clean process for them if you can be a responsive lender to their questions or the way that they’re filling out the application, then you can obviously drive up your originations,” says Merchant. “Now, I said a lot of ifs – if you can do this, if you can do that. But we get excited at TransUnion because we can help lenders provide information to calculate what somebody can save.”

Although TransUnion and its competitors focus on lenders, dealers using verification tools, fraud-detection tools, and what Merchant calls other innovations can help them get the best financing for their consumers. Dealers can also point consumers to tools to help them better understand how to uncover savings and improve credit.

“I think anyone that’s in the business of arranging financing for a consumer — and dealers do arrange financing when selling a vehicle — it’s always important to help the consumer in that process by pointing them toward educational tools if they need them,” Merchant says. “Putting consumers in the best position to get a loan and to finance that vehicle – that obviously is in the interest of the dealer. Given that, and that TransUnion offers lots of consumer tools and consumer education tools, (dealers can) just simply send them to transunion.com, and consumers can sign up for services where they can model out their scores and improve their credit.”