According to Experian: car loan delinquencies fell in the first quarter of 2011, for the first time in three years. Default rates have dropped by 28% from the previous year; meaning that banks are feeling more confident in lending to more sub-prime customers. The banks also have more money to lend so they are more willing to take risks and lend to people with less than perfect credit.
This is good news for Independent Dealers because they have been working with people that have bad credit and sub-prime car loans for many years. Since the credit crisis millions of people who used to have good credit now fall under the sub-prime category. Even though this is a discouraging look at the current economic situation, it is encouraging for the sub-prime market.
Reasons that your car dealership may not be getting more sub-prime car loans:
These motivated buyers are going with the first person who calls
Sales people are not working the special finance leads quickly and diligently enough
Customers are discouraged with having to provide more information than they are used to
Special Finance Managers are unwilling to change with the times and are complacent with their current status quo
Dealerships have never worked with sub-prime customers before
Not knowing that the sub-prime market accounts for more than a third of all auto loans and is increasing every month
Managers feel that old school advertising is enough and don’t realize that they could improve their sales by 5-10 deals a month
Reasons to jump into sub-prime:
Increase traffic; extra 20-40 ups
Increase sales; extra 5-10 deals
Increase gross; extra $12,000 to $22,000 a month
Sub-prime is on the rise and which creates new profit avenues for smart car dealers. These motivated sub-prime car buyers are in need of automobiles and only need to be educated on their current situation and what they can do to improve. An auto loan for bad credit is the right path to take to improve their current credit situation. Be the one that helps to improve our national economic crisis and don’t be the one that is on the sideline watching everyone pass you by.
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