Why we should all love a good down payment
Not news: Auto finance companies make money when they lend money.
News: Auto finance companies are happy to lend less money because borrowers made good down payments.
It may seem counterintuitive to think that auto finance companies, like Exeter, are happy to lend less money. In fact, you might think it would hurt us to lend less money. The truth, though, is that it helps. It helps the consumers who borrow the money and purchase the cars, automobile dealerships where cars are sold, and lenders like Exeter. It’s a true win-win-win situation.
Let’s start with the consumers. When car-buyers make good down payments, they owe less money for their vehicles. That means they’ll pay less in interest. They also have a better chance at being approved for financing options in the first place. So, it’s definitely in their best interests to make down payments and save money.
When consumers make healthy down payments, it puts cash in the dealerships’ hands right away. Lenders like Exeter pride themselves on fast funding, but we know nothing beats receiving immediate payment at the time of purchase. Plus, when your customers put more money down, they immediately have more equity -- which, in turn, means they may be in a position to trade in their vehicles sooner and buy new ones. The faster a dealership turns customers around in the buying cycle, the more they make.
Finally, it helps Exeter and other lenders when consumers make down payments because it shows commitment to maintaining their vehicles and making their payments for them. Over time, the lenders make money as borrowers keep making payments – hopefully without the need for costly collection activity. That helps lenders stay in strong financial shape so they can keep doing what they do best: helping more dealers by helping more consumers purchase more cars tomorrow!
Bottom line: It’s good when consumers make down payments of at least five or 10 percent – if not more – when they buy new or used vehicles. So, if customers can save for a good down payment before they head to the dealership, it can make the purchasing process better for everyone involved.
Exeter Finance LLC is a non-prime auto finance company headquartered in Irving, Texas. The company partners primarily with franchised auto dealers throughout the country to make car ownership a reality for consumers. For more information, call our Dealer Operations Group at 1-855-4EXETER (855-439-3837).