Car Loans (Part 1)

There are many factors that can effect a car loan. Some of these factors may seem obvious, but there are several others that the average consumer may not be aware of. Some of these include your personal risk factors, the length of the loan (referred to as the term), amount financed, vehicle risk factors, and loan to value. Each one of these factors can have a significant impact on your monthly payment. I will be posting seperate blog posts for different pieces of this to keep each post from getting dragged out too much. For this post I will start by explaining credit.

Obviously your own personal credit is the number one factor in determining whether you will get financed, how much you will get approved for, what rate you will recieve, etc. Even this can get complicated though. It is a no-brainer that the better credit you have, the better your rate will likely be. The interest rate that you are charged is dependent on how much risk the bank would be taking in loaning to you. It is like playing the stock market. The more volatile the stock, the higher the return can be or, conversely, the more you can lose. 

The same goes with the bank loaning you a vehicle. The bank is taking a chance on whether or not you will repay the debt and how consitent you will be in doing so. A bank is trying to determine whether or not you will pay your loan back monthly at a specified amount. This is not just about whether or not you will pay, but also how much effort they might have to exert to get you to pay, for example phone calls and letters. The bank will look at several factors. Initially, they will look at your credit report and determine whether you have paid other loans monthly at a specified amount. 

Often, people will get a small loan to start building their credit or get a credit card. While these loans will definitely help, it will not be as much as buying a car or buying a house. Your ability to pay matters, too. When looking at a loan, the banks and credit agencies will calculate your ability to pay compared to other people. Essentially the bank is asking, “How many people can afford to pay this $75 a month loan?” Obviously a higher percentage can afford this payment than a $400 a month payment. 

Banks will also be determining how much free cash flow you have a month. Although you may have an 850 score, you might only make $10 more than what your credit report shows you owe a month. This an exaggeration, because you will not have a perfect credit score if your debt to income (how much you owe compared to how much you earn) is too high. A credit report will estimate your debt to income without knowing your income, and it will effect your score, but it will not tell the whole story. 

The timing of your accrual of debt also matters. If you have not borrowed money very often, but you buy a house and a car back-to-back your credit will likely take a large, albeit temporary, hit. The credit companies will want to make sure that you have not lost your mind and decided to go on a massive spending spree (If you do decide to do that, just remember that I love you). That is one reason not to buy a vehicle right before, or in the process of, buying a house. The bank will want to see that you can afford a car itself before they will risk money on whether or not you can afford a car and a house at the same time.

Another fact concerns whether you are a nomad or not. Do you move from town to town? Are you a job hopper? Is this your first real job? If you cannot stay in one place or you are unable to hold down a steady job a bank might worry about your ability to pay for the periods that you are unemployed. If you are just getting your first big kid job they will likely be wary about letting you pay them $600 a month when you just started making $600 a month. You “millenials” scare the ever living crap out of banks (and me, too, sometimes).

There are many, many, many other factors that effect your score and your chances of getting a loan, but I am nearing unconsciousn…… ess from boredom just typing this. Off to more exciting stuff…

Real Caring vs. Perceived Caring

I know where you think I am going with this. You think I am going to tell you how to tell how other dealers or other salespeople may act like they care when maybe they do not, but this post is a confession. I truly care. I want people to find the vehicle that best fits their wants and needs at a price that best fits their budget. I want people to be happy with their purchase. I am destroyed when I find out that a vehicle that a customer has purchased from me has caused them probems. But this is not a post about how great I am as a salesperson. It is about how I have failed to properly display how much I care at times.

Earlier today I was making calls to follow up with past customers. I was rolling right along thinking how awesome I was for actually making these follow up calls, because, as I am sure many of you have experienced, a lot of salespeople in the car business do not provide good follow up with sold customers. As I was making these calls though, I could tell something was off.

Some customers sounded very appreciative. Yet others actually seemed disappointed. I have had this feeling before, and I have always been unable to put my finger on the problem. That is when I heard a booming voice from on high. Ok, actually it was just Richie Tipton, our new car manager. If you know Richie, you will know why I use the term booming.

Richie asked me what the problem was with my call. I was beginning to think Richie was a mind reader, but he simply said, “You need to sloooooooow down.” That is when Richie pointed out the problem that had escaped me. I sounded scripted. I am scripted. Here is what I say:

Me: “Hi, this is Bill Vaughn from Kirksville Motor Company. You purchased a X from us X months/years ago and we just wanted to follow up and see how things were going.”

Customer: “We are doing just fine.”

Me: “Great! If you ever need anything from us, please do not hesitate to give us a call!”

Offhand reading that it probably does not sound so bad. Now imagine hearing someone say that who you might imagine has said it over and over again for the last year and a half. Guilty as charged.

What Richie pointed out to me was that it did not matter how sincere I feel in caring about the customer. If they do not feel that then it is not real. That resonated with me, because I am a believer in the idea that perception is reality. I am so used to saying my unintended script and hearing that everything is fine that I just blow right through it.

The problem is not that I do not care. It is that on these calls I sometimes do not seem like I really care. Frankly, it sucks realizing I have let those customers down rather than having made them feel even better about their purchase and where they bought their vehicle. Outside of addressing any potential issues, that is the entire point of the call.

Bravo to Richie. Richie did not tell me that I needed to work on this to sell more cars. He told me this because he wanted me to do a better job of showing customers that I care, and that means he cares. After all these years in this cutthroat business, that often gets drug through the mud, it still matters to Richie that customers feel cared for. And it means a lot to me that Richie took time out of his day to make me better.