The Rate Wars: Fight Or Switch?
Rumor has it, that customers are coming into dealerships armed with 3.9 APR from local credit unions. In a numbers-sensitive marketplace where customer convenience is mandatory, would it not makes more sense for dealerships to switch to partnerships with local credit unions than to fight as financing competitors?
While the alliance may yield only a flat fee for the financing, the dealership can gain an outstanding opportunity to build strong customer ties with service agreements or prepaid maintenance plans. Financing for protection packages and controlling the sale are reasons enough for dealerships to expand their lender base.
Let’s say for the sake of drill that a credit union will not fund dealership contracts. Now what? The old adage of knowledge is power works for everyone, so get the facts. Research the credit union’s Truth in Lending disclosure. Then, get acquainted with the Pledge of Shares portion of the disclosure statement, which may or may not be a part of the contract. You can locate this documentation on a section of the credit application. Now you can educate the customer on the difference in collateral when they sign any contract with a lender where they have deposit accounts.
If the credit union is unfamiliar with the quality of your customers, the time you invest to educate them about your client demographics can be very rewarding- for all parties involved.
Simply stated, business is built upon foundations of knowledge, trust, and goodwill. As you are aware, everyone likes doing business with people they know. So get to know the credit unions and lenders in your own locale. You can then join the dealerships that are winning the rate war with acknowledgement, benefits, and less collateral.
Dealer Marketing Magazine, May 2005, p. 12