How To Choose The Right Digital Finance Platform For Your Dealership
There probably isn’t a dealer out there who hasn’t been approached with a dizzying array of shiny objects under the ‘Digital Retailing/Finance Technology’ label, purporting to do anything from solving each friction point in the dealership sales and finance process to putting a man on the moon (well, the last one is not true, but the hyperbole in some digital retailing marketing makes one almost believe it could be).
The truth is digital retailing, in its purest form, has the potential to be a very good thing. But, to date, the ‘potential’ has yet to be realized, especially when it comes to digitizing the deal. Most Digital Retailing (DR) platforms available today allow customers to perform initial car purchasing steps online, but there is a significant drop off in ‘offered’ digital functionality as the buyer moves closer to ‘the’ deal (i.e., digital finance). Instead, more often than not, buyers are steered to a basic payment estimator tool or are dead ended into a lead capture form when looking for transactional pricing and deal information. This is not digitizing the deal.
Some of the limitations, understandably, are due to the dealers’ own resistance to digitize F&I. But for less reluctant dealers, the much more complicated challenge is finding the right partner that has the experience, knowledge, and technical capability to deliver accurate, qualified payment information and the complex deal structuring required for all credit tiers, and all possible make, model, trim, option combinations.
In today’s economically uncertain environment, when affordability represents the biggest challenge to car buyers and monthly payments matter more than the selling price, ensuring that quoted payments are accurate is critical to building trust and modern retailing success.
If establishing realistic payment expectations and providing ‘qualified’, transactional payment information is a desired function of your ideal digital retailing experience – here are six filtering questions every dealer should ask any vendor quoting payments before adding them to your technology stack.
1. Can you put the customer in the right car with the right deal structure matched to the right lender programs rates, terms, payments, advances with a fundable deal?
This really is the bottom line for any vendor claiming to offer a complete digital finance technology solution. If any part of that equation is missing, so is the deal. For example, if the vendor says they can put the right customer in the right car, does that mean the right car that the customer selects? Yes? Great, but is it joined to the other components such as the right payments? Yes? Great! But when you say right payments, do you mean a ‘vehicle qualified’ payment? Or the right ‘credit qualified’ payment? Or the right payment matched to your lender programs? Or all of the above? How many pieces of that puzzled can they solve? All of them? Great. Have them demonstrate it to you, and if they are successful, move on to question 2.
2. Are you certified from a security compliance standpoint by the credit repositories?
Why is this important? Without that compliance certification, the vendor will not have access to critical information that will enable them to access needed data and use logic to match a customer’s qualifications to lenders’ pricing, underwriting, and advance highlights. If they say no, the conversation is over. If they say yes, ask for evidence of certification, then…move on to question 3.
3. Do you have access to raw credit report data and the certifications & technology to parse it out?
Why is this important? The vendor needs to have the intuitive software that will enable them to go deeper than just an estimated credit score and, for example, be able to calculate debt to income ratios. For example, if a customer says ‘I want this car, I want this payment’ but their debt to income rate is higher than acceptable lender guidelines, you will not get to a fundable contract. Debt to Income ratios are included for most lender underwriting rules which requires parsing out the raw credit report data to calculate – but 99% of Digital Retailing tools don’t even have access to such data! However, if you have found the 1% and the answer is yes, move on to question 4.
4. When quoting payments, whether your solution offers a payment calculator or self-penciling desking tool, does the quote include all dealer & OEM incentives/rebates down to the rooftop and VIN, dealer specific fee structures and all applicable taxes tied to the jurisdiction – plus interest rates, money factors and residuals down to the trim level model ID of the vehicles, at each credit tier and monthly term? And then matched to the customer’s credit, ability, and stability qualifications? Matched to your actual lenders’ underwriting and advance guidelines?
Okay, that is a mouthful, but think about it. Without this data, you are calculating A payment, but not THE payment for your customer – which creates confusion and unavoidable friction in the negotiation when the “deal” cannot be honored in store. Is the answer is yes? Great, move on to question 5.
5. Do your online payment quotes waterfall to best payment for customer or profit to you from your Lender’s Standard Rates Sheets, Special Incentive Rate Sheets, and Regional Rate Sheets simultaneously?
Why is this important? There can be more than 500 data points that impact the final terms of a deal. Such as, is the vehicle, new, pre-owned, certified, year of vehicle, same brand as franchise dealer. Each vehicle can have different mileage, term, advance guidelines before you even consider the customer qualifications.
Other factors such as loan to values (LTV’s) effect whether deals get loan approval or not. Trade-in’s effect LTV’s. Payment to Income ratios can impact available qualified terms such as 84 months for standard programs, but if amount financed is $1 below the minimum allowed, max term is 72 months. And for special APR, 84 months may not be allowed.
So, if the answer is yes to questions 1 through 5, then the vendor has achieved the equivalent of putting a man on the moon. More likely, the answer is no to all, or some, of the above. But do not despair! A final question to ask is:
6. Are you collaborating with, or open to collaborating with your existing vendor partners that fill the gaps in your digital buying journey?
If the answer is yes, then you have found a partner who is looking out for the best interests of everybody in the transaction: the consumer, the dealer, the lender, the other supply chain providers – somebody that’s truly helping to evolve digital retailing and make it work.
The reality is that there are vendors out there who consistently misrepresent their DR/Finance Technology capabilities, ultimately disappointing dealers, perpetuating stereotypes with customers, and undermining momentum required for a critical retail transformation. But vendors who are transparent and willing to work with your dealership and other vendors to fulfill the promise of digital retailing are worth their weight in gold and might just be able to help you complete the DR/Finance Technology picture.
Pete brings over 40+ years of experience in automotive finance and technology as Founder and CEO of eLEND Solutions™. Founded in 2003 as DealerCentric®, Pete is leading the company’s evolution to an automotive FinTech platform focused on deal generation solutions that power transactional digital buying experiences for the retail automotive industry.
The platform specializes in hybrid digital credit, identity, and finance solutions - designed to accelerate conversions of digital end-to-end purchase experiences - concluding with a transactional, fundable deal structure.