The traditional divide between prime and non-prime car buyers, and the dealerships that sell to them, is fading. Today, almost 30% of customers do not qualify for traditional bank or OEM financing1. This niche of non-prime buyers has been called “one of the fastest growing parts of the finance sector today”2, and is a market segment that should be watched closely in the wake of the pandemic.
Regardless of how dealerships viewed non-prime buyers in 2020, perceptions will need to be revisited as the long-term financial impacts of COVID-19 play out. It may be that this market segment continues to grow, and the dealerships that evolve to serve a wider range of customers will have new opportunities to boost their bottom line.
If your dealership is thinking about selling to non-prime buyers, here are 4 considerations for serving the non-prime market segment:
- Start with financing
Before suggesting vehicles, find out how much money the customer can qualify for. Help the customer understand how the loan would impact their life – will the payments fit their budget? You’ll want to play a bit of an advisory role to help ensure your customer is taking on a manageable amount of debt. By starting with financing, you’ll avoid disappointing a customer later if they can’t qualify for the vehicle they’d hoped for.
- Understand your non-prime buyers
Dealership staff and salespeople should be aware of, and empathetic to, the many reasons customers may be non-prime. Listen to your customer so you can understand and suggest what vehicle might be right for them. Although the vehicle they go home with may not be the one they came in to buy, help them see that this can be a step on the path to improved credit, newer vehicles and better rates in the future.
- Think long-term
As customers make regular payments and improve their credit, they’ll be able to qualify for more money and lower rates. If you build a strong relationship today, your customer may become a lifelong buyer, returning to trade in vehicles and qualify for lower rates in the years to come.
- Have relationships with a wider variety of lenders
If you’re only dealing with big banks, you may find you can’t approve many non-prime customers. Build at least one relationship with a trustworthy lender that has experience in the sub-prime market. The more often you can offer flexible, budget-friendly financing programs to your customers, the more deals you’ll be able to close.
Although the non-prime customer is a rising market segment, it is by no means a new one. The change is in the dealerships who are catering to the non-prime market and taking advantage of opportunities to build life-long customers in the process. By partnering with a financing provider who offers in-depth scoring and flexible rates, dealerships can offer financing that responds to a customer’s needs and credit profile. With a financing partner you can trust, the non-prime market is easily within reach.
Ask us how the Lucy Automated Decisioning Platform can help your dealership with non-prime financing. With a proven track record, Lucy can automatically approve 85% of your clients at credit, regardless of their credit history.