While it leaves dealers in no doubt about the severity of current trends, it also suggests that real profit opportunities exist with F&I in the future.
New rate-for-risk products could increase profits and should help to increase finance acceptance rates, securing more vehicle sales.
The twin approach of a rate for risk pricing model and dealers ensuring that every single customer is offered finance is the basis for this future confidence.
Certainly, the ongoing fall in finance penetration should have all concerned.
The current economic downturn means fewer sales so it’s even more critical that dealers that maximise the income from every opportunity – that’s why finance should be discussed with each customer.
The current credit crunch scenario means customers now have fewer low-cost loans to choose from and they are possibly more open to accept higher rates.
Black Horse firmly believes that point-of-sale finance needs to follow other lending institutions and take a risk-based approach to selling its products.
Overall, when finance houses enjoyed higher margins it wasn’t such a concern that some cases were unprofitable.
But as margins come under pressure it makes no sense to accept loss-makers.
As a result Black Horse has piloted a risk-based pricing approach which has seen a significant level of incremental risk-based business captured, giving dealers higher acceptance rates and profit and a return for the finance house.
Ask yourself which direction you are going to take and consider these options.