6 Questions You Must Ask Every Digital Retailing Vendor Quoting Payments

There probably isn’t a dealer in the US 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 that 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 digital finance technology.   Yes, pieces of the puzzle are in place, but the complete picture has yet to emerge. And we believe that the complete picture of digital finance technology is not just about an online experience or a payment calculator, it’s about gathering consumer data, vehicle data, lender data, and a deal structure – and aggregating that information to facilitate an accurate and transparent exchange of information, including a realistic payment expectation – that gives customers what they want and that actually protects the dealer’s profits in the deal. 

So, how does a dealer know whether or not to sign with a digital finance technology vendor and if the pieces of the puzzle that vendor offers can help to complete that picture for his/her dealership?  Here are six questions we think every dealer should ask before signing on the dotted line. 

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?

Okay, that is a mouthful but, think about it, 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 software 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 require 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-help desking tool, does the quote include all applicable taxes – local, county, and state – plus license and registration fees for that jurisdiction, as well as 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 match to the customers qualifications payment quotes to actual lender underwriting and advance guidelines?  

Why is this important? Without this data, you are not calculating the real payment for your customer which creates a disconnect which can lead to friction in the negotiation. Is the answer 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) affect 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 the amount financed is $1 below the minimum allowed, the 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 your 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, vendors/solutions that fill the gaps in your solution?

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, dampening the reputation of digital retailing and finance, and setting back critical evolution.   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.

By Pete MacInnis