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Just be nice! Why the soft strategy to car finance is key to success!

Just be nice! Why the soft strategy to car finance is key to success!

15 March 2022 Concept Car

Are you thinking about how to improve your chances of car finance? Do you have a bad credit rating, a poor credit history, limited income and low savings? Are you worried that you won’t be able to buy a car at all?

Then we have some advice for you: Take the soft approach to car finance. Don’t get confrontational, don’t start haggling as if your life depended on it. Instead, treat lenders as partners and reach out to them.

Sounds naïve? We guess it does. But it isn’t. It’s by far the best strategy if you need bad credit car finance. Or any kind of car finance for that matter. And, best of all, you’ll feel a lot better with it.

In this article we’ll fill you in on the soft finance strategy and how you can put it to your advantage. Ready to secure a loan, save money, and improve your buying experience?

Then let’s go.

Haggling 101: What the “experts” recommend

Google “car showroom strategies” and see what you come up with. Nine out of ten times the recommendations are as follows:

Act tough, don’t let the dealer take the initiative, be prepared to draw the line and to walk away from the proceedings if you can’t get what you want.

More concretely, here are the five most popular strategic recommendations:

#1 Haggle, haggle, haggle.

Then, haggle some more.

The car price you see at a car lot was never intended to be final, this line of reasoning goes. Although dealers will deny it, they actually expect you to try to bring it down.

There are actually many in-built opportunities for haggling, even outside of the regular dealership profit:

Seasonal discounts or sales by the manufacturer. The dealer should theoretically make these known to the customer. Or they might not.
Bonuses paid out by manufacturers towards the end of the quarter or year. These can actually make up the largest part of a salesperson’s profit.
In many cases, dealers may not be able to reduce the purchasing price, but could throw in a few extras.

Haggling may not be the moist agreeable thing in the world. But if you don’t do it, or so some will make you believe, you’ll end up losing thousands of Pounds.

Further reading:
Why haggling is a mistake (and what to do instead)

#2 Hard talk

Dealers will supposedly only acknowledge your point of view if you treat them with disdain. Since they’re still one of the least popular occupational groups, this is something that many buyers will only too freely buy into.

Being nice will not get you anywhere. What you need to do, the experts claim, is to be tough and don’t take no for an answer.

Walk away - Concept Car Credit#3 Walk away

Not only should you talk the talk. But you should also walk the walk if there is no sign of success.

What does this mean?

The idea is that each financial negotiation consists of various stages. Sometimes, you won’t be able to come to an agreement during one of these phases. This doesn’t mean that the process has come to an and, however.

Simply, be prepared to walk out of the negotiations if the lender is unwilling to meet your demands. You can always come back to see if things have changed.

More often than not, the haggling guides purport, they will call you back and make you the offer you’ve been waiting for.

#4 Take the initiative

Are all expert guides on car finance written by men in the 1970s and 1980s? It sometimes seems that way. Certainly, the aggressive macho-like tone of these features suggests as much.

What they would have you do is to dictate the pace of the negotiations:

Come to the dealership with the price you want to pay already firmly engrained in your mind.
Then, instead of waiting for the dealer to make you an offer, let her know what you expect and force her to follow your lead.

This concept was inspired by the fact that many dealers like to hit their customers over the head, to never stop talking and let make it clear that they’re the boss. Which can be intimidating and steal your thunder.

So why not turn the tables, the idea goes. Simply surprise them by taking the lead – and never letting it go.

#5 Separate trade-ins from the purchase process

This is one we keep hearing.

You should, many argue, never let the dealer know you have a car to trade in, because this will lead to a different – worse – offer than the one you could get by keeping the two separated.

The rationale for this recommendation is that dealers make most of their profit from selling used cars – even more than from selling new ones, in fact! So they will be very willing to offer you a slightly better price for the car you want to buy (because there is a lot of leeway in it), but in return keep the trade-in price as low as possible (to increase the profit for the next sale).

By first negotiating the price of the car you’re buying and then moving on to the second part, you can get the most out of both transactions.

Sounds reasonable? Sounds professional?

Whatever it sounds like …

These strategies hardly ever work.

Haggling is an art which very few have truly mastered. And in case of doubt, the salesperson / lender will be better at it, because they practise it every day. The same goes for the idea that taking the initiative during the negotiations could possibly get you a better deal. If anything, it’s only going to cause irritation.

Hard talk and walking away from the sale may have been applicable strategies at a time when dealers would risk sitting on their stock for a long time unless they made you a deal you couldn’t refuse. The Internet has long changed that. Most offers are going to be online for a few days at best – walk away and you’ll miss out.

Also, it’s very much a seller’s market at the moment, with demand far outstripping supply. No dealer is going to be impressed by a customer who won’t accept their terms.

Finally, separating your trade-in and purchase makes no sense whatsoever. Especially for those with a bad credit rating, an attractive trade-in may be the door opener to a deal in the first place. Just like a down payment, it reduces the risk and can even get you a better rate for your loan.

So, how does the soft strategy for car finance work?

A soft approach is everything the aggressive strategy isn’t.

As part of this concept, you treat the lender – which will mostly be the dealer – as a partner. Although dealers weild more power, especially if your finances are problematic, they will usually still want to strike a deal with you.

This is foremost because they rely on cash flow. It is better for them to keep sales going than to insist on the best possible price and have a car standing around for a few days more.

PCPs are a good example of how innovative thinking by dealers completely changed the market around. (not that we recommend them – but they did originate in a very tangible customer need.) As part of these plans, dealers found ways to finance a car even for those who otherwise would never have been able to afford one.

Here, too, you take the initiative – but not to overpower the dealer, but to demonstrate your creditworthiness. We’ll get into that in a minute.

Stick to the limit

Finally, you combine these soft factors with a very clear resolution not to exceed a pre-defined price limit.

The result will more often than not be a far more pleasant loan application process, a greater chance of success and, for the majority of households, better terms and conditions.

Interested? Let’s break things down a little.

Set yourself a limit and never ever deviate from it - Concept Car CreditSoft Strategy Step 1: Set yourself a limit and never ever deviate from it

A softer approach to negotiations can look like a surrender or like you’re getting down on your knees.

This need not be true, however. There are two outcomes of a negotiation which you should avoid:

  1. Not getting a deal at all.
  2. Paying too much for the car, the loan or any extras – and getting too little from your trade-in in return.

Whether or not you’ll get a loan is not always up to you.

But the second point is. No one’s forcing you to sign that contract, no one’s forcing you to pay more than you can afford.

If you set yourself a clearly defined limit, you’re actually arguing from a point of strength. You know what you want and what you’re prepared to pay for it. You may not get it – but you’re not going to be swayed into a bad deal if that’s the case!

The same, by the way, goes for the extras you definitely want.

Soft Strategy Step 2: Come prepared

Information is power. This has always been true. But it’s particularly true in the 21st century.

What does that mean for your approach to car finance? Simply put, you should be up to date on all your financial information:

  • Your current income
  • Your current spendings
  • The ratio between income and spending (“disposable income”)
  • Your credit score
  • Your credit report
  • and your savings

You can’t erase your weak points. Nor will you be able to make overnight changes to your financial status. However, what you can do is to explain why your score is low and why that won’t be a problem for your current loan.

Taking a long good look at your credit report is vital in this regard.

It offers a detailed look at the problematic financial transactions which determine your credit rating.

Ultimately, for many dealers – us included – what matters is your disposable income and how secure your current job is. The more you can demonstrate with hard facts that you’re okay in this department, the better your chances of getting an offer.

And of course, all information should be up to date and verified for correctness. (You’d be surprised how many mistakes you’ll find in your credit score!)

Have your expectations in order - Concept Car CreditSoft Strategy Step 3: Have your expectations in order

The idea of an aggressive strategy is to appear larger than you really are. The soft strategy for car finance proposes something far less glamorous: Simply accept your financial realities and act accordingly.

If you have a family with two children, don’t come in looking for a Porsche. If you’re in debt, don’t expect to drive a Volkswagen Passat. And if you just need a car to get you to work, a big SUV is not the right choice.

We don’t get to decide which cars we fall in love with. But we can be realistic about what we need and what we can afford.

Walking into a dealership requesting a car that seems like a good fit is a signal to the dealer that you’ve made a well-informed decision.

Soft Strategy Step 4: Offer your trade-in right from the very beginning

There is a grain of truth in the assumption that a dealer will treat negotiations for a trade in differently from you looking to buy a car. In fact, we can safely assume it’s true.

Unfortunately, for those with financial difficulties, it is also true that separating those two parts of the buying process is a bad concept.

Just think about it: Which of the following two scenarios is going to be more attractive to the dealer:

  1. Someone with a bad credit score who wants to buy a car and has no securities to offer.
  2. Someone with a bad credit score who wants to buy a car and can offer a trade-in car that will make the dealer a sizeable profit.

Chances are that if you go for option 1, you won’t even get to the second stage. The dealer will probably reject you straight away.

Your goal, as we indicated, is to get a car finance deal, ideally get the best possible price and stay within your financial limits. A trade-in is the best ace up your sleeve to achieve those goals.

Don’t waste it with a pseudo-smart, aggressive strategy.

Soft Strategy Step 5: Work with the dealer

Believe it or not: Dealers are actually passionate about cars. Of course, they want to turn a profit. But don’t believe for a second that it doesn’t make them happy to see you drive off the lot with a smile on your face.

This is especially true for us at Concept Car Credit, as we’re dealing with drivers who’ve often been rejected several times at banks, credit unions, and other dealers. Nothing beats that feeling of telling them that we can offer them a loan.

Aggressive strategies assume that you need to work against the dealer. The soft strategy to car finance assumes the exact opposite:

To get the best results, you should regard the dealer as your partner and work with her. - Concept Car CreditTo get the best results, you should regard the dealer as your partner and work with her.

This is not as unlikely as it may seem. There is nothing wrong with asking the dealer for her opinion on what they believe to be the ideal car for you or an achievable monthly loan rate. It is fine to discuss with them whether it might be better to aim at a longer repayment period or to scale back your expectations.

The dealer doesn’t need to be your friend. In fact, that could be the other extreme to avoid. But there’s nothing wrong with allowing them a little input in your decision process.

Soft Strategy Step 6: Pick the right moment to buy

Haggling over umbrella prices during a rain shower is not a good idea. Trying to bring down ice cream costs in July is going to be futile.

We all accept these simple truths. And yet, when it comes to buying a car, we simply walk into a dealership expecting to get a great deal no matter what.

The car selling business is cyclical. People buy considerably more cars in the Summer than in the Winter time. And they are more willing to spend early in the year, when they still have some money at the side, than towards the end, when Christmas presents are taking up a large chunk of the budget. Which means that there is less wiggle room during the warm months and more during the cold season.

Vice versa, there are clearly defined moments when dealers are open to haggling: At the end of each quarter (to secure quarterly bonuses), at the end of the year (for the big annual bonus), when a new model generation arrives (to get rid of the old inventory).

Knowing about these cycles put you at an advantage. Or, to be more precise, not knowing about them, could create the wrong impression that you’re not creditworthy – while you merely applied at the wrong time.

Pick the right moment to apply – and then make the most of it!

Soft Strategy Step 7: Offer a down payment

Taking the initiative doesn’t need to be aggressive. It can actually be a gesture of collaboration as well.

down payments are a dealer’s best friend. They are a fantastic tool to reduce the risk of a default, create more security, reduce interest and shorten the repayment period.

They are even better if your financial status is less than optimal.

We fully understand that not everyone is capable of making a deposit. We don’t make it mandatory, but we do encourage it. The easiest and most intuitive way of approaching this is to, after calculating what you can pay each month, set aside that very amount for a few months and offer that sum to the dealer as a down payment.

It may look like a simple trick, but it’s very effective and a great boost to your chances of getting car finance.

The soft approach to car finance at CCC

At CCC, we don’t just encourage soft strategies for car finance to our customers. We also practise what we preach. We love talking to you about how to get you behind the wheel again.

Get in touch now by phone 0800 093 3385 or using our contact form.

15 March 2022 Concept Car