Dealer Financing, Ease Your Dealer’s Financial Problem
Offering different services is a prerequisite for companies to thrive in the modern market. And financing certain business sector is just as important as any other activities to ensure profitability. Financing is especially important for companies to ensure that they will always be able to compete with their competitor in a fairer terms. Other than that, financing can also help companies to secure their bottom line and improve their customers’ overall satisfaction.
This is especially true in companies that specializes in finance loaning activities. A successful used car dealership usually depends on this kind of financing in order to stay ahead of its competitors. While there are other used or new car dealerships that use this particular service as well, the challenge that they have to face might be different from one another. These dealerships might have to contend with the amount of profit they have earned with finance companies, which can cause problems. Especially when it is finance companies that earned more money than the actual dealers after a financing deal is finished.
So, what is dealer financing? To put it simply, dealer financing is a type of loan provided by retailers (such as car dealerships) to the customers. Later on, a third-party financial institution such as banks and other similar institutions will service this loan. Banks can purchase this loan at a discount before collecting principle and interest payments from the borrower. Because of this, the loan from dealer financing is also known as an indirect loan due to the mechanism of its payment.
Being involved in a dealer financing activity means that the customer needs to pay attention to how it works. Despite dealer financing comes with many benefits for all of the involved parties, they need to understand how it works. One of the key aspect of dealer financing activity is the buy rate. We can define buy rate as an interest rate that financial institution quotes to the dealer. Despite the rate can have a fixed number, the dealer can set the number higher should the dealer desires it.
With this in mind, dealers can set up a higher number of interest rate when compared to the actual rate itself. We need to keep in mind that dealers have no obligation to provide the best interest rate to the customers. By doing this, dealers can potentially earn more profit since there are lesser amount of parties in this loaning deal. Moreover, car dealers can actively promote and secure a deal with a customer rather than waiting for customers indefinitely.
Therefore, dealer financing is an ideal practice for business ventures that deal with expensive commodities. Cars, motorcycles, trucks, and other vehicle are some of the most popular choices for dealer financing. Because these vehicles rely on equipment and gradual maintenance to sustain them, dealer financing became popular to buy them as well. Not to mention, sales from these vehicles are usually high-valued in nature, so it is highly lucrative for businesses to earn profit from this financing.
There are several reasons why businesses need to do dealer financing. The process is simple enough, where businesses can simply divulge how much they can pay per month to the dealer. Afterwards, the dealer will provide the information about the exact number that the business needs to pay monthly. In addition, dealers are more invested to sell their vehicular products in this type of deal, so there are less probabilities of cancellation.
Dealers have several ways to offer dealer financing for their potential customers. For instance, dealers can collaborate directly with a lender that will support all of the potential costs. If not, dealers can also look for other platforms to look up for alternative sources of loans. Dealers who work with a bank can buy some loan from the bank before selling it to the customer for future payment. Seeing that the cost for offering dealer financing can be quite costly, companies with different business scale need to adjust to it accordingly.
Using a loan platform may also help businesses in offering dealer financing. Using this platform is almost similar to cooperating with a bank to buy loan, only with a heftier price. Loan platforms usually cover many different financing sectors from car dealership to other commodities. In addition, loan platforms are usually more expensive if they specialize only in dealer financing since this is the only main source of income. Because of this, businesses need to pay attention to a possible price rate reduction from this specialized loan platform if they want to offer dealer financing.
Finally, it is important for businesses to learn more about the dealings behind dealer financing. As it can help businesses in receiving commodities such as vehicles to support them, they have to know how this financing works. It is important for businesses to know the exact interest rate that they have to pay based on their financial capabilities. By doing that, businesses can attain as many benefits as possible from participating with dealer financing activity for their own sake.
With extensive knowledge and experience, CONFINS has supported vast variants of multi-finance business lines including dealer financing by unlocking the full potential of your business process. CONFINS is the right solution which have been used by various multifinance companies in Indonesia. Complete with seamless and high performing features and modules, you can entrust your business operational to CONFINS.