Running a used car dealership can be tough, especially when the dealership’s typical buyer has neither enough money to purchase a car outright nor decent enough credit to get a bank loan easily. Everyone assumes that car dealerships make a killing, but they forget that business owners have to pay for everything from marketing to sales commissions. If the dealership isn’t popular, it can be hard for it to grow and thrive, at least in those initial years.
Larger dealerships often supplement their income from car sales by offering in-house financing. This approach both brings in more buyers and generates some extra income in the form of interest, but it’s not a viable one for small dealerships that are just getting off the ground.
Thankfully, companies like Consumer Portfolio Services offer perfect solutions. They work with franchises and independent car dealerships to finance buyers that would otherwise have to go without. Read on to find out about the benefits of working with a third-party company that provides indirect financing through the dealership.
Expand the Business’s Audience
Used car dealerships that can’t offer in-house financing have an uphill battle when it comes to closing sales. Only buyers that are able to secure bank loans are usually able to afford more expensive vehicles, and they tend to buy new or certified pre-owned.
Drivers with poor credit can sometimes get personal loans for smaller amounts, but they’ll buy cheap cars that won’t be as effective at helping the dealership turn a profit. The ability to offer car loans at the dealership will expand its audience by drawing in more people who want to purchase decent used cars but can’t meet the local bank’s stringent eligibility requirements for taking out a loan.
Make a Commission
When car buyers take out loans through the dealership’s program, they make money even if the actual lender is a third party. Depending on the financing company, one of two things happens. The dealer receives either a one-time commission for each borrower that takes out a loan or gets a percentage of the interest.
If there is little competition in the area, dealerships can also add their own fees to the mix in the form of higher interest rates to make sure they are getting paid for their role in the borrowing process. Drivers rarely even realize that this has happened.
Get Extra Money from Add-Ons
Some used car dealerships offer more than just in-house financing. They also offer add-ons. Those add-ons can include:
Gap insurance policies that provide coverage for cars while the buyer is still in the initial stage of paying off the loan where they owe more than the car is worth.
- Extended warranties that cover vehicles no longer covered by the manufacturer’s warranty.
- Service plans that keep drivers coming back to the same dealership to have the car worked on.
- Think About the Possibilities
Used car dealers that work with all buyers, not just those with good credit, sometimes have to find ways to supplement the income they make from sales, alone. Working with an independent financing company to offer in-house loans offers a wealth of possibilities.
