FACT or FICTION - The only way to qualify a customer is by their credit score
March 28, 2016
With Ren’T’Own® and Lease’T’Own® we don’t encourage the practice of checking your customer’s credit history.
More than likely your RTO/LTO® customers have bad credit. You already know that – that’s why they’ve come to you in the first place. So why damage their credit further by running a credit check? With the new Privacy and Risk Based Pricing rules in place you’ll run into a heap of paperwork too if you use their credit history as a factor in your approval process.
You simply need to qualify these customers based on STABILITY rather than credit. Concentrate on length of employment, length of residency, how many years with the same bank, etc…. STABILITY IS THE KEY! Of course, you’ll want to verify references, income, and current debt as well.
A “stable” customer has three basic needs.
They need a Job
They need a car to get them to work
The need a place to live
You can look at even just two of those basic needs and decide if the customer is stable enough to pay for a car. If they have worked for the same employer for several years, it is likely that the employment will continue. If they have lived at the same address for some time, it shows that they can be trusted to pay the necessities.
Most of your “qualification” process takes place in your casual conversation with the customer. Finding out how long they’ve been in the area, what brought them to the area, do they have children in the local schools, etc…. Look for ties to the community. For more detailed information gathering, we provide our dealers with a Customer Information Sheet. The most critical piece of information on this document are the references. These references will be invaluable for helping to locate the customer if they should default on payments. We also recommend that at least two of the references be relatives – preferably one should be their mother. (Give us a call and we’ll tell you the story behind that comment!)
Remember, with Ren’T’Own® you remain the titled owner of the vehicle. This arrangement is not like your typical car sale. If you happen to misinterpret someone’s stability, you’ll be able to recover your vehicle, re-lease it to the next qualified customer, and continue the income stream. From the customer’s point of view, the Ren’T’Own® arrangement works in their benefit too. If they get in a financial bind they know they can return the car to you and no further damage will be done to their credit. If you refer back to one of our earlier blog postings - The Golden Rule, you’ll remember that once the customer gets back on their feet financially, you’ll be glad to put them back into another vehicle.
This process has been working successfully for over 26 years by dealers across the United States – Give it a try!