When Alternative Financing Solutions May be Needed
Dealerships have various challenges they will face when trying to sell vehicles. While many buyers will be highly qualified for financing or won’t need to finance a vehicle, there are others who may not be able to buy a car using traditional financing solutions. Dealerships can provide alternative options to certain buyers to make it more likely the buyer can afford the vehicle and will be approved for financing when they’re ready to buy. Some of the times this may be needed include the following.
Low-Income Buyers
Buyers who have a low income compared to the monthly payments for the vehicle may not be approved for traditional financing. Many financial solutions require buyers to have a certain income, as the goal is to prevent the payment from being too high of a percentage of the person’s monthly income. However, buyers may want to make sure they have a reliable vehicle, so they may go slightly over the limit based on their current income. Unfortunately, this can cause them to be denied.
Buyers with Poor Credit
Buyers with poor credit scores are often denied financing. When the buyer has a poor credit score, it can be an indicator that the buyer will not make their payments promptly and could miss payments, leading to a repossession. However, poor credit can be due to high medical bills, a significant amount of student loans, a divorce, and other things that were not in the buyer’s control when they happened. The credit score may not accurately reflect whether the buyer can afford the vehicle, but it can still prevent them from being approved through traditional financing solutions.
Buyers With a Limited Credit History
The credit history of a buyer is viewed to see if they make payments on time each month or if they have fallen behind on repaying debts. However, younger buyers may not have an extensive credit history, so it may not be possible to see if they make payments on time and are likely to pay for the vehicle promptly. Unfortunately, with traditional financing options, the buyer may be denied, even if they are otherwise qualified for financing.
There are many reasons why buyers can fall into these categories, but it doesn’t necessarily mean they can’t afford the vehicle. Yet, with traditional financing options, they’ll be automatically denied. Dealerships that want to help buyers and offer more financing solutions to allow more buyers to finance a vehicle will want to look into alternative solutions such as those offered by Consumer Portfolio Services.