Auto Finance: The importance of being service-oriented

Many times the lowest rate isn’t the best rate

Feb 16, 2021

It would seem that choosing a company to finance that shiny new car purchase would be a simple decision: pick the company with the lowest rates, right Not so fast! Many consumers and dealership finance offices may see things this way. What could potentially be wrong with picking the bank that gives the customer the best rate, or the bank that will pay me the most finance reserve on the deal? The answer can be found when comparing luxury department stores that focus on service rather than the lowest prices. For many shoppers, the element of personal attention and service during and after the sale is equally as important as the upfront cost of the goods themselves. Sure, I could run down to my local big box store for an item I’m looking for, search the aisles for hours and finally grab a product that I believe will suit my needs, or alternatively I could patronize a store that isn’t known for the best prices, but for service, and be in and out in a matter of minutes with a product that I know will suit my needs and a company that will continue to provide support after the sale even though they’ve already secured my funds. I agree, it’s a tough choice; however, from the organizational point of view, repeat business and being seen in a positive light by the public eclipses “point in time” profits. Have you ever heard of the phrase “play the long game”? That’s exactly what we’re talking about today.

Let’s start our journey at a car dealership. It’s a sunny, busy day. Life is grand. You’ve got several customers walking your lot to select their next vehicle, and then one of them decides it’s time to proceed with that red convertible you’ve got in the showroom. Excellent, you say, let’s submit a credit application and get things going! You grab your latest book of bank rate sheets and select a lender that not only gives the customer the best payment possible, but also pays you the most reserve on the deal. Everyone wins! Well, maybe in that moment.

But maybe this is a newer lender that you’ve had minimal experience with thus far; they seem to run a pretty lean organization which undoubtedly contributes to their ability to offer the best rate. The process for submitting the credit application is a bit cumbersome, and once submitted you realize you’re in an underwriter queue 50 deals deep. An hour goes by, your customer grows restless and decides to “go to lunch” while they wait (a.k.a. another dealership).

Now let’s rewind a bit and assume you decide to use old faithful bank; their rate is middle of the range when compared to other lenders, but you know they’re solid. You’ve used them many times, you have developed a relationship with their underwriting and funding teams, and they have a simple, straightforward way of submitting applications with a service level that is second to none. Everything gets approved in a matter of minutes and your customer is off to the races in that new red convertible within the hour.

Of course the customer is having a great day as everything worked out for them, but the game is far from over for the dealership. The dealer needs to package up the contract and supporting documents and send them off to the lender to obtain funding. Most times the speed in which deals are funded is of upmost importance to your finance office. After all, the sale really isn’t completed on your end until you’re paid on that contract. Lucky for you, old faithful bank is customer- and technology-focused; they’ve developed an electronic contracting system that allows you to transmit your paperwork at the click of a button, verifying the deal terms instantly and queuing up an ACH transfer for the next business day. Maybe you made a little less reserve on the deal, but there was no headache involved and it went without a hitch.

Now let’s go back to the company who is focused on the cheapest rates. You overnight your documents to the bank hoping for expeditious funding, only to realize a week has gone by and you still haven’t been paid on the deal. You try calling their funding department to see what the holdup is; the line is busy, nobody answers, you can’t talk to a human being who can tell you what you need to provide in order to get funded. They run a lean organization, remember? Eventually you are notified that you’re missing a required document, so you send it in, and a few more days pass by and then you’re paid. Sitting there you think to yourself “was this hassle worth the extra $100 in reserve we received?” More often than not, it isn’t. You had to circle back with your customer several times to obtain documentation, and maybe they had to come back in and resign a new contract. Now the customer has a bad taste in their mouth from both the dealership and the bank. You may have secured that extra $100 reserve this time, but next time that customer will more than likely visit your competitor down the street and choose a different bank to finance their purchase.

Let’s fast forward a year down the line. Your customer has been driving that red convertible and absolutely loves it. There have been no issues and it gave them a renewed lease on life. The customer has some questions on the account and decides to call the lender to gain clarity and resolution, only to find that wait times to talk to a living person are hovering around 45 minutes on a daily basis. Frustrated, the customer does the next thing that they can logically think of: they visit the dealership to see if you can assist. Being a customer-focused dealership, you’re happy to help. However, you can’t get ahold of anyone at the bank to assist either. The customer leaves the dealership without resolution……and a bad taste in their mouth once again for both the dealer and the bank. They think to themselves that it’s great they are getting a little lower rate, but where’s the service? Was it really worth it? Jane that lives next door has a similar car and loves the service she receives, she was in and out of the dealership when she purchased the car with no hassle, and when she has questions for the bank, a living, breathing human being answers the phone to make sure she gets the resolution she requires, all in record time.

We could go through examples like these all day long. The point, however, remains that exceptional service before, during and after the sale go a long way in keeping customers happy, which in turn increases the likelihood that the customer will visit you next time they’re in the market. So how is this achieved?

Of course emerging technologies like web-based credit applications and electronic contracting are a great start, but these also can be difficult and costly to implement for smaller lenders. Having a dedicated team of people to answer dealer questions on credit applications and funding packages are a great way to demonstrate that you’re a service-focused organization that can be trusted to provide that personalized level of service many desire. Additionally, less costly automation techniques exist which can streamline the way your company handles certain key processes.

Excellent service is the foundation of any successful transaction, from beginning to end. We’ve all have had instances where we’re thrilled with a product we purchase, but the level of service received has left us wanting more. It’s like going to a restaurant with the best food in town, only to realize that it takes two hours to receive your meal and the waiters are rude. Even if the meal were fantastic, the chances of you returning are highly diminished. The same logic applies to all transactions, but rings especially true in automotive financing. There are many players in the game when an auto purchase occurs, from the customer, to the dealership, all the way to the bank financing the vehicle. It’s a delicate dance. However, it could not be more important. Repeat business and a positive image in the eyes of consumers make or break an organization. One customer singing your praises to all their friends, family and on social media is often much more valuable than spending money on advertising or running a lean organization to say you have the best price in town. Tony Hsieh, former CEO of Zappos, hit the nail on the head with the quote “Customer service shouldn’t be a department, it should be the entire company.” Being able to say you have the best price is certainly nothing to scoff at. However, consumers knowing they will be taken care of during the whole transaction is the glue that holds it all together and keeps folks coming back for more.