Rate Dictates Why Auto Dealers Select A Lender, Survey Finds
More prevalent among new car dealers
HAUPPAUGE, NY, May 1 – Perhaps to no surprise, the No. 1 reason an auto dealer selects one lender over another is rate, however, new car dealers are more concerned than used car (aka pre-owned) dealers, who typically see more challenged credit, a just-completed survey found.
GrooveCar, Inc., the indirect lender of auto loans based here, canvassed over 200 auto dealerships in the metro New York region to determine the top five reasons why one lender bests another, particularly when a credit union is involved. The financial intermediary facilitates the sale, lease, purchase and financing of cars and motorcycles for over 20 credit unions on Long Island and New York City.
“In essence, we have organized a product mix with vehicles that are fun, practical, affordable and luxurious, and assembled the best dealers in the business to help provide the right price and service for our customer base, which is largely Credit Union-driven,” emphasized David Jacobson, GrooveCar’s president.
While 54% of the respondents opined that rate matters the most, almost all included it in their top three. The actual time to submit an application and receive a final disposition from the lender -- known as “turnaround time”-- rated second, while the “advance” – the dollar amount a lender is willing to commit on a particular vehicle – ranked third.
Further down the list in the decision-making, but equally important to dealers were fewer stipulations, which rated fourth, followed by the quality of the relationship and ease of contacting and communicating with the lender via a dealer/Credit Union interface or telephone.
The survey underscored that dealers are less likely to send applications to lenders which consistently ask for stipulations, such as pay stubs to support income claims or copy of a deed to prove home ownership, when other lenders do not.
Overall, respondents felt the “relationship” between the dealer finance manager and CU analyst plays an important role in the overall quantity and quality of the applications submitted. Point of fact, most lending institutions rotate analysts to preclude any possible conflict of interest with dealer F&I (finance and insurance) managers.
The study also reinforced that dealers are apt to submit applications to those lenders who respond quickly to questions as well as those who can be contacted by telephone to discuss a particular application.
“Interestingly, the results showed that used car dealers were more concerned about the ‘advance’ and ‘fewer stips’ (stipulation) than turnaround time,” explained GrooveCar President David Jacobson. “This relates to credit quality. A dealer will wait longer for a credit decision on a poor credit applicant. Why? Because there is less competition for the lender. Therefore, the dealer will wait.”
About GrooveCar, Inc.
Founded in October 2000, the privately held GrooveCar provides a comprehensive array of automobile and automotive services and products – shopping, buying, financing, ownership – for credit unions and credit union members, as well as access to motorcycles, recreational vehicles and boats. Additional information may be found at www.groovecar.com.
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