Dealer financing programs are financial tools that help dealerships get a leg up on the competition. In order to stay afloat, dealerships must find ways to get buyers into the showroom and address their budgets. Offering dealer financing can be a great way to do both of these things.
Dealerships that are able to offer dealer financing can compete with larger dealerships when it comes to attracting buyers who might not be able to afford a car outright and need assistance with financing. This allows car dealerships to broaden their customer base significantly, which naturally means increased sales.
Dealer financing programs are not just convenient for customers of modest means; they can also be a huge benefit to dealerships. They allow car dealers to generate more revenue and stay competitive regardless of your local market conditions.
Dealer Financing Programs: What Are They?
Dealer financing is any program where car dealers offer financing options directly to buyers at the time of sale. This can be done in-house or through a third-party finance company. These programs empower customers to make the decision to purchase a car right now and get all set-up to pay for it over time without the need to run back and forth to a bank to handle loan paperwork.
Dealer financing programs are slightly different from traditional automobile financing through a bank. Banks typically want to lend customers the lowest possible amount so they can get paid back as quickly as possible. However, car dealerships are able to offer more flexible options. This is because their products are specifically designed with selling cars in mind (rather than selling loans). As a professional reseller of cars, you know what your customers need better than any bank could.
Dealerships need to compete with large car brands and mid-size franchisees, and offering dealer financing creates more opportunities to move products from your lot. In the modern market, dealerships without these programs find themselves at a massive disadvantage in comparison to large car brands and mid-size franchisees that offer on-site financing. These larger dealerships can offer customers not only more convenient but more flexible payment options as well.
Financing remains the most popular way for buyers to purchase a car. In fact, over 85% of all new cars are financed rather than purchased outright. This is because most people don’t have the cash on hand to buy a car outright and will require a loan—you miss an opportunity by letting them take that need to the bank instead of your office.
Dealer financing is a great way for buyers to purchase a car and a great way for dealers to offer expanded services. It allows buyers to spread the cost of the car out over time while the interest actually makes the transaction more lucrative for the financier than a cash payment would be. Dealer financing is a true win-win for customers and business owners, which is a rarity in the business world.
Independent Car Dealer’s Advantage
Larger brands and franchises might be able to offer great financing options. However, car dealerships that are independent actually have an advantage over these companies. They have more flexibility in the type of financing they can offer, not to mention the makes and models of automobiles they can carry.
The larger car brands and franchises need to work with banks or finance companies that can cover their lending needs and can get locked-in to working with banks that have an existing relationship with the car manufacturer. Some of these larger financing companies are not interested in working with smaller businesses anyway.
Independent dealerships that offer dealer financing can create relationships with a variety of finance companies and find the right partners for their operation. This gives them more options when it comes to finding the right lender. Dealer financing programs are a great way for car dealerships to compete with larger dealerships and form lasting, profitable relationships with local banking institutions.
The Benefits to Dealer Financing
Increased Revenue
Adding a dealer financing program increases revenue for your dealership. It can attract customers who might not be able to afford a car in full. This means you have more sales, which is the ultimate goal of an automotive dealership.
Customer satisfaction
Offering a dealer financing program allows you to better serve your customers. This can lead to more sales and satisfied customers.
Larger customer base
Dealer financing programs allow car dealers to broaden their customer base. This means you have a higher chance of getting new customers. Your dealership can offer more flexible options for buyers, which makes your business stand out from the competition.
Competitive advantage
Offering dealer financing can give your dealership a competitive advantage. This is because it allows you to offer more flexible payment options than the competition. This can attract buyers who might not have decided to buy a new car because they didn’t think they could afford the investment.
Commitment to clients
When you offer dealer financing, it shows that your dealership is willing to work with customers to get them the car they want. It sets you apart from other dealerships and allows your business to stand out as one that is committed to service.
Different Dealer Financing Programs
There are different types of dealer financing programs that your dealership could offer:
Subprime Lenders for Dealers
Subprime loans are loans that are given to borrowers who don’t meet the usual requirements for a loan. These types of loans are typically given to people who have bad credit or no credit at all. Subprime loans can be used for a variety of things, including buying a car. Since bad credit is typically one of the biggest barriers prospective car buyers face, subprime loans make it easier for them to get approved.
Indirect Auto Financing for Dealers
Indirect auto financing is a type of dealer financing that allows car dealers to finance the sale of a car through a financial institution. This program is beneficial for car dealers because it gives them the chance to offer more payment options. This type of financing is typically offered by banks, which purchase cars from the dealership. This includes all of the paperwork, which makes it easier for customers to buy a car without having to worry about filling out tons of paperwork.
Indirect auto financing helps dealerships by streamlining the process of selling cars and making it easier for customers to buy vehicles. This is beneficial for both parties because it makes the car buying process smoother and more efficient.
Contact Red Mountain to Discuss our Auto Dealer Financing Programs
We’re here to help your dealership get the financing you need, and we offer flexible payment terms that will work with any budget. We also aim to approve all of our dealers, so you can be sure that we’re a reliable funding source. Learn more about our dealer financing programs. We look forward to talking with you about our services and helping your dealership grow!
I’m a kid at heart disguised as an auto researcher and business owner. I’ve always enjoyed providing insight in the form of reviews (anime, video games, autos, etc.) When I’m not researching, I’m spending time with my family, driving my Dodge Challenger, riding my motorcycle, and finding new entrepreneurial pursuits.
