Online Credit Faces Hurdle

Imagine being able to transact the right customer on the right car, with the right financing. It was hard before the credit crisis, now it's near impossible.

Fear of not getting approved for financing has kept consumers on the couch and out of the showrooms. Dealers are rummaging through showroom and web-based leads that are rarely pre-qualified, spending valuable time dealing with customers on vehicles for which they no longer qualify.

Meanwhile, lenders struggle to obtain credit applications that meet their new tighter lending criteria.

The constant bad news in the media adds to the misconception that financing is no longer available no matter what your credit score. This couldn't be any further from the truth.

There are plenty of people who have credit scores in the high 700s currently looking to purchase vehicles. Right now is the best time for these qualified buyers, as deals are in abundance.

Even better news, many lenders are offering competitive rates available for credit-worthy customers.

The question is how to get the right dealers in front of credit-worthy customers. One way is with online credit applications. But it's an area of which dealers, for the most part, are unaware.

“Despite finance availability being the hottest issue facing the auto industry today, most dealers still view online credit applications as an afterthought on their website,” says Pete MacInnis, founder and CEO of DealerCentric Inc., a firm that provides online financing solutions for dealers.

He attributes dealer reluctance to the perception that online credit applications seem to be specifically designed for credit-challenged customers instead of attracting consumers who are actually able to get financed today.

Dealers who have figured it out report increasing online applications up to 500% with sales-to-submission ratios hovering around 30%.

Longo Toyota, in El Monte, CA, says it has increased its applications by 400%, while Norm Reeves Honda, also in California, reports a 505% increase.

“The better solutions attract qualified buyers seeking a more efficient purchase and finance experience,” MacInnis says.

The DealerCentric application provides consumers with call-to-action functionality such as streaming video which hook and reward them throughout the credit application process.

DealerCentric also uses a “Get approved in seconds!” message that some participating dealers say is driving the increase in their online credit applications.

The average credit score of consumers submitting a DealerCentric online credit application is 620, MacInnis says.

“With the propaganda surrounding the credit market, it's no wonder consumers would prefer to get pre-approved online, in the comfort of their home, saving themselves the potential embarrassment of in-person credit denial,” he says.

Upon receiving submitted applications dealers are able to distinguish between shoppers and buyers who have taken this next step.

“The online pre-approval process assists both sales and finance by bridging the gap between the two departments while enabling dealers to capture and convert leads to credit applications, qualify consumers to specific vehicles and lender programs at the beginning of the sales process, taking the guesswork out of structuring deals,” MacInnis says.

Having pre-approved financing at the front of the sales process determines the amount of payment a consumer can afford and how much down payment is required. This strategy enables auto dealers to put the consumer in the right vehicle and structure a profitable deal before the consumer ever performs a test drive.

These applications are able to pitch and catch consumer data with Web-based portals such as Cars.com, customer-relations management systems such as DealerSocket, Dealer Management Systems such as Reynolds & Reynolds and loan aggregators such as RouteOne.

The more advanced online credit applications also encompass features such as text messaging, or “blogging” between consumers and dealers and automated phone call-back service to consumers.