VANCOUVER, BC / ACCESSWIRE / September 27, 2021 / Our world has been turned upside down in the past 18 months. As the pandemic swept around the globe it touched every single industry in some way. With quarantines, shutdowns, and lockdowns, people found themselves out of work or working substantially reduced hours. This resulted in smaller paychecks. Unfortunately, the cost of living did not decrease with the worldwide reduction in income.
As financial struggles have come from the vast business closures (some never to reopen) and resulting unemployment, consumers are seeing impacted credit scores. This is not occurring in isolated pockets but is widespread across North America and the world. People are experiencing lower credit scores and it is affecting their ability to make major purchases like homes and automobiles.
In the auto industry, automotive lending has traditionally served those consumers with a prime score which is around 680 or better. Those are the buyers that dealers focus on and seek after because lending is simple, straightforward, and almost 100 percent approval rate. A prime score consumer is an ideal customer for most dealers.
However, the changes brought about by the pandemic and the devastating impacts on livelihoods. Many consumers are not in the same financial place that they were before the pandemic and dealership lenders are finding it necessary to make some much-needed adjustments to accommodate this new customer. In response, solutions like DecisioningIT are emerging to bridge the gap between dealers and these new customers to better meet their lending needs.
Emergence of a New Customer
The pandemic era customer has a different profile than what dealership lenders are accustomed to working with. There is a steep increase in auto customers who are non-prime, meaning a score of 650, ranging to deep subprime which is a score in the three hundreds or four hundreds.
Rosa Hoffmann, CEO of DecisioningIT, shared some insight regarding the post-pandemic auto buyer. “The non-prime and subprime customer is one that may have gone into a bankruptcy or perhaps had vehicles repossessed, there could be many, many scenarios,” she said. “And those are always challenging to get financed, but we can still help them. However, it’s that niche that’s going to start to emerge really soon. I think we’re going to see a major increase in the non-prime customer. Right now, we are seeing car payments being made, but delinquencies will start increasing. Yes, people are making their payments right now. But there’s a lot of government funding available to individuals at the moment. When that ends, things will get a lot tighter. And that is when this new customer will emerge.”
In order to best serve this new demographic, Hoffmann says that dealers need to make a few adjustments, the first of which is to have a lot of options on the table. There are lenders that are able to support these customers, likely more than dealers may realize. She also says that it is important for dealers to educate themselves on what non-prime lending actually looks like, both from the standpoint of the lending industry and from the customer’s point of view. Auto lending will be changing a lot in the next few years.
Non-prime Lending: A Refresher
Working with the non-prime customer is not a new experience for most dealers, but Hoffmann suggests that dealers need to rethink their approach when helping customers who may not exactly fit the mold of the “perfect customer” with perfect credit. The truth is, these customers are still buying vehicles, they are just seeking out other means such as buy here pay here when dealers could be putting forth the extra effort and keeping them instead of sending them off to other dealerships that cater more to that customer.
“Dealers know what non-prime lending looks like,” said Hoffmann. “They all know what it is, they’ve all had customers who fit those criteria, but the need here is re-educating them so they understand that a little extra work and effort can get these people approved the first time.”
The pool of non-prime lending specialists is very small at this time, and it is common knowledge that non-prime loans are not easy. Working with these customers is not as simple as submitting their information, getting an auto approval, and sending them on their way. There are certain criteria that must be met – and different lenders often have different criteria that they look for when making their determination to finance an auto loan.
This can leave the dealer unsure of how to proceed and some customers can fall through the cracks.
AI Loan Matching Helps get Consumers get Approved
Lucy is a loan matching tool that harnesses AI technology that acts as a customer credit management system, matching lenders to customers. With an 85% success rate, it means dealers can successfully get more customers pre-qualified for auto loans across a broader spectrum from prime to near prime as well as subprime and even deep subprime.
The Lucy software is designed to help get more consumers financed regardless of their financial condition. This translates to more non-prime sales for both new and used car dealers, keeping them more competitive by empowering them to help the customer who may not fit the traditionally “ideal” profile. It broadens the dealer’s scope and reach so they are able to reach, attract, and sell to more customers with diverse financial profiles. The Lucy software offers vehicle matching, payment calls, CRM functionality and much more. Although the system is amazing at supporting non-prime consumers, the value to prime consumers is there as well. With good, best and better financing options offered, Lucy takes care of all the details for all consumers, helping them get on track for a more promising and stable financial future.
Keeping Customer Care at the Forefront
In the end, it all comes down to customer care. As we move into the post-pandemic world it is going to look different. This means that auto dealers are going to have to toss out tradition and do away with preconceived notions of the “perfect customer.” They are going to have to rethink customer profiles and readjust to this new normal.
“These customers are going to be in a higher demand, and they should be treated just as every other customer should be treated, same service, nothing different,” said Hoffmann. “If their interest rate is a little higher than a prime customer they shouldn’t be treated differently. They’re still buying major, big life purchases, and they should have the same type of service from dealers.”
It is important to reach these customers, to help them get financed – and that is why Lucy was created. Through the predictive AI loan matching capabilities, all customers are treated the same, given the same opportunities to get financing for their automotive purchase. And it gives dealers a broader platform for providing exceptional customer care.
Hoffmann explained, ” Dealerships will see a huge flux in non-prime lending in the coming years and that means a lot more work and attention must be given to these customers, this will become a new norm, just as digital retailing made a huge presence in our industry during the pandemic” We saw more consumers wanting to start and finish their purchase online, this was why the Lucy Widget and API were created, to support dealership websites and online digital retailing tools”
To learn more about Lucy and how DecisioningIT is helping automotive dealerships better serve their customers, visit https://www.decisioning.it/ today.