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Finance first

In a traditional dealership sale, after a cursory discussion about budget, it’s not unusual for finance discussions to come right at the end of a long dialogue about suitable vehicles. Whilst this works perfectly when the customer’s budget expectations are realistic, it’s not quite so good if expectations and reality are out of synch. Interestingly, the growth of online finance brokers might have something to teach us about the benefits of putting finance first in the showroom.

How does online finance work?

Online finance brokers start by working out how much a customer can borrow and, importantly, whether they’ll be able to borrow the amount that they want.

The customer puts in a range of details about themselves, including their income and other key financial information, and the system does the leg work before coming back with one or more suitable finance options.

Effectively, the system does the finance thinking up-front and delivers a deposit, finance amount, interest rate and payment plan that should, in principle, be available to the buyer to fund their vehicle.

Why put finance first?

A bit like a mortgage offer in principle, online vehicle finance offers an ‘accept in principle’ for car finance.

By getting to know the customer’s financial profile and then looking at the available funding options, it focuses on the concept of affordability before too much excitement builds about any particular vehicle.

It also takes into consideration the credit quality of different customers and only offers plans that the customer can actually access.

Applied in the dealer showroom, think how much time this could save your sales team and how much frustration it could spare your customers. After all, there’s no point spending too much time discussing the merits of a Ferrari, if the budget will only stretch to a Ford.

Can’t dealer finance systems do this already?

Many dealers already offer simple online calculators. Finance calculators certainly help customers reach a basic level of understanding on how far their budget might stretch. In particular, interactive calculators let customers see how much monthly payments can vary depending on the size of deposit, interest rate and length of agreement that they enter into.

However, beyond this, most dealer systems require both customer and vehicle details before offering specific finance options. The opportunity to source an ‘accept in principle’ offer for a particular amount for a specific customer is not widely available but can already be arranged with Paragon Car Finance.

Learning from the fast-moving world of online car finance, some development work with lenders in this direction may well be worth consideration for the future.

30 September 2016

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551