In our ever-evolving digital world, relationships sometimes seem to be more with our computer screens and our phones rather than with the human beings on the other side of their computer screen or phone. Nothing could be further from the truth.
Automobile dealers expressed relationships with their lenders as a top priority during Open Lending’s recent Executive Lending Roundtable. There are human beings with families to feed at the other end of that transaction and not the money-grubbers some make the dealers out to be. When we all work from a position of respect for the other side of these relationships, everyone can win with indirect lending. It was great to hear the raw honest truth from our dealer panel at ELR.
Of course, the financial agreements are important, but the fact is the dealers are also concerned about maintaining repeat business. They also want someone they can turn to when they need help putting a deal together. When contract is well structured and incentives are aligned with both the lenders and the dealers’ goals, the relationship grows.
Dealers are looking for what we call “full-spectrum” lenders: lenders who don’t simply cherry pick the A paper but dig down deeper into the credit buckets to serve the customer in front of them. Lenders should define what they expect to accomplish from the indirect program regarding periodic loan volume, portfolio limits, credit quality, profitability and the concentration of volume from any number of dealers. Audit loans purchased to confirm compliance with all stipulations and call back terms. Periodic audits with the customer should be conducted to confirm vehicle make, model, options and mileage are correct. Trust but verify.
From the dealers’ perspective, they make money two ways: the sale of vehicles and the sale of ancillary products, like GAP insurance and service warranties. Allowing the sale of reasonable amounts of ancillary products goes a long way to keeping a dealer that is productive for the lender happy.
Lenders should always retain credit decisioning, but we must be quick and consistent about it. Open Lending can help with that – in just a few seconds! Additionally, being available evenings and weekends to rehash deals is particularly important to dealers. Making it easier for them to do business with you is sure to bring more deals into lenders.
But you’re not done yet; funding must be handled promptly as well. Serving as a consistent source of funding is critical to maintaining long-term, mutually beneficial relationships. Go ACH, which will make it easier for everyone involved.
Lenders should also ensure the dealer understands your needs and monitor for excessive delinquencies or how your borrowers are treated at the dealership. A disconnect in any of these items listed above may cause a lender-dealer relationship to fall apart, but by respecting and appreciating each side of the transaction, it becomes far more than that. It’s a relationship.