The Role of Car Dealerships When a Loan Application Is Denied
Your dealership is one step away from landing a sizable sale. All you need to do is wait for the lender to approve the buyer's application, and then they will be driving away.
Unfortunately, this step represents a stumbling block for many dealers. What happens when a buyer's car loan is denied? Do you completely lose out on the sale?
The answer depends on whether the buyer might qualify for other loan options through Edge Financial Services. Explore the role of car dealerships in this scenario.
What Your Dealership Can Do When a Loan Application Is Denied
Your dealership doesn't always have much control over the lending process for buyers. You connect them with third-party lenders who approve or deny their loan applications. So, what can you do when a customer's car loan is denied?
Start by communicating the reason for the denial to the buyer, if the lender has not already done so. The customer may feel frustrated, and calmly explaining why their car loan was not approved might help them better understand the situation.
Then, consider the following options.
Explore Other Financing Options for the Buyer
Just because one lender denied the customer's application does not mean they do not qualify for any financing. There may be other lending options that better suit their financial situations.
For example, some lenders may be willing to accept their application with a co-signer requirement. This would require another person to sign for the loan and assume responsibility if the lender defaults on their payments. Other times, a lender might need income verification to approve the loan.
You can also explore lenders like Edge Financial Services LLC that specifically work with customers who have low credit scores and high debt-to-income ratios. Expanding your auto financing to include more diverse lenders could reduce the frequency of denials.
Request That the Buyer Return the Vehicle
If a customer cannot find any lenders willing to lend them the full value of the vehicle they are interested in, or if they prefer not to provide collateral or accept higher interest rates, the only option may be to back out of the sale.
Your dealership likely includes language in buyer contracts specifying that the purchase is contingent on the loan approval. If the loan is denied, the next step would be for the buyer to return the vehicle to you.
Some dealers prefer to wait for the financer's approval before allowing the customer to drive away. In this case, you might have an easier time stopping the transaction.
Return the Down Payment or Trade-In and Show Other Vehicles
If the customer has already provided you with a down payment on the vehicle or traded in another car, you’ll likely need to return these assets to reverse the sale. Before you do, ask the buyer whether they would be interested in purchasing a more affordable vehicle.
A lender might approve them for a smaller monetary amount than what they were originally requesting. If the buyer plans to trade in a vehicle, you can show them other cars with comparable value to what you are offering for the trade-in.
If all else fails, you can advise them on certain actions that may improve their loan eligibility in the future. Refer to the lender's reason for denying the application. If the customer's credit score was too low, they had too high a debt-to-income ratio, or they simply didn't have much credit history, explain how the customer can potentially improve these areas.
Improve Financing Approval for Customers With Edge Financial Services LLC
If your customer's car loan was denied, consider referring them to Edge Financial Services LLC. We help buyers maximize their chances for approval, even if they have challenged credit. Your dealership receives payment on the sale within 48 hours of submitting documentation.
Contact us today to learn more about our dealer financial services.
