In-house financing can be one of the strong tools for car dealerships while luring more buyers and increasing their sales. The way to be outstanding among competitors in today’s competitive automotive market doesn’t just involve selling cars but also giving buyers flexible and customized financing solutions that make it easier for them to take off the lot.
Are you thinking of implementing In-house financing at your dealership, or are you just looking to improve what you have? Here’s what you need to know about how it works and the benefits to your business.
What is In-House Financing?
In-house financing refers to the instance where the dealership itself finances customers, as opposed to sending them off to third-party financial institutions.
This helps dealerships to offer more options based on a customer’s need, increasing the chances of closing a sale.
Benefits of In-House Financing
If you are considering stocking and maintaining a line of aftermarket auto parts in your inventory, the following are some of the advantages:
1. It attracts more buyers
It is also hard for many customers, especially those with imperfect scores, to get approved for traditional financing. In-house financing allows you to offer loan terms that are just a little bit more flexible, thus opening it to a wider range of customers who may otherwise have been turned down.
2. Higher Profit Margins
With this in-house financing process, the dealership can make sure of controlling interest rates and loan terms.
Flexibility in managing interest rates or terms helps not only in closing the deals but also allows potential high margins on each sale since you will be earning an income from the sale of the vehicle and also the interest on the loan.
3. Builds customer loyalty
For example, customers who direct-finance at your dealership are more likely to return for future purchases and services.
Great terms with an easy buying experience mean more long-term relationships equate to a successful business.
4. Smarter Selling Process
Traditional financing can come with long applications, approvals, and wait times.
In-house financing allows you to skip the headache so your customer can get approved and hit the road sooner, making for much smoother and more enjoyable processes.
Challenges to Consider
While in-house financing has its advantages, it is important to be aware of the potential disadvantages involved:
1. Risk of Non-Payment
Since you are lending directly to the customers, the chances of defaults are always high. It is a very strong way of minimizing risk to incorporate a strong mechanism for creditworthiness assessment and lay down clear repayment terms and conditions.
2. Administrative Expenses
Management of financing would imply additional staff looking after the work.
You would require a separate team for the processing of loans, collection of payments, and customer queries, which again may increase your overhead cost.
Risk Management Strategies For Your Car Dealership
While the possibility of in-house financing gets dealerships concerned about the possibility of not getting paid, there are several ways to cushion yourself against that risk and ensure all goes without a hitch.
1. Credit Ratings
However, this does not mean that you can eliminate the credit checks simply because in-house financing allows for more flexibility. You may do minimal credit checks and set up minimum credit requirements to minimize defaults.
2. Installment Plans
Such manageable repayment terms can also be given in the form of longer installments with lower monthly payments, therefore making it easier for your customers to pay back.
Make sure that the payment deadline and terms are well-discussed with the customers to avoid any misunderstanding.
3. Down Payments
Encouraging larger down payments reduces the principal loan amount and facilitates the assurance of the customer’s commitment to complete the payment plan. This can also be one cushion in case some payments are not made.
4. Follow-up on Customers
The development of good customer service after the sale will help you stay in contact with the buyers through their loan period. Friendly follow-ups about looming payments, interest in adjustments for those customers who are struggling, and customer service support can go so much further in the prevention of missed payments and engender loyalty.
Growing Your Market Reach
Now that the pros and cons of in-house financing have been considered, it is high time to position your dealership as one that most car buyers will want, especially those dealerships seeking flexibility with more lenient financing. That’s where digital marketing comes in. Today, being found online is key to buyers coming to your doorstep. Potential customers are sure to do an online search before visiting dealerships, so it’s important to have your website clearly state the reasons house financing is available. Prominently displaying advantages, requirements for qualifications, and same-day approval can turn a website viewer into a lead.
Gotsearch: Give yourself more online visibility.
Once you have your in-house financing program in place, it’s time to get the word out to customers! The first step in driving more buyers to your dealership is to optimize the dealer’s online presence. Whether through SEO, local listings, or targeted content, Gotsearch.ph specializes in the field of helping automotive businesses grow online.
Let us help you reach even more customers and close even more sales. Gotsearch.ph welcomes you today! Let’s go faster with your digital marketing strategy and let your dealership thrive!
