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Auto Dealer Financing: How a Soft Credit Check Puts the Customer in the Right Car

soft credit checkA soft credit check builds trust, shows respect, and helps keep the sales process based in reality.

For a customer with bad credit, shopping for a new car can be a stressful undertaking. He needs to find something affordable, but he also doesn’t want multiple dealerships doing hard credit checks that negatively impact his already less-than-favorable credit score. When he finally finds a car he thinks he’ll be able to finance, your customer crosses his fingers and hopes an approval will be on the horizon — with a reasonable interest rate.

One big way you can help your customers is by performing a soft credit check rather than a hard one while they are still in the shopping phase of buying a car. This will give you both a glimpse into how much he might be approved for, long before getting to the financing stage in the buying process. A soft credit check also helps the salesperson get through the sales process faster.

Hard inquiry vs. soft inquiry

A hard inquiry is necessary when a customer is ready to buy a car because the credit check will decide whether or not a line of credit will be extended. It also determines the interest rate the customer can be offered. A hard inquiry remains on an individual’s credit report for two years and can possibly have a negative impact on credit score.

A soft inquiry is more of a quick background check. It allows you to assess financial risk before the customer decides to apply for a line of credit — it’s like a pre-approval. A soft inquiry has no effect on a customer’s credit score.

While a hard inquiry happens when a customer is proactively applying for a line of credit (they definitely want to buy a specific car), a soft inquiry is best when the customer is still shopping.

Why a soft credit check is key to finding the right car

Your next customer might walk onto the lot assuming he can drive away in a brand new vehicle, or just not have realistic expectations about what he can and cannot afford. He also may not be the best at money management or living within his means. It may come as a shock to him in the auto dealer financing office when he learns that his dream car isn’t aligned with his reality finance situation.

However, another customer may come in who understands how damaged his credit is, but needs a reliable vehicle to get to work – so that he can pay down his debt. He may be extremely anxious about working with a salesperson, because any ping to his credit, such as a hard inquiry, will put him in jeopardy for even getting an auto loan.

A soft credit check will give you a glimpse into what your customers’ credit is like, and you’ll be able to help them set a price range that makes sense. Once they understand what they can afford, show them vehicles that match what they are looking for and what they can pay. By finding that sweet spot right off the bat, the entire car shopping experience is much easier — and it ensures your clients drive off the lot in the right car, without damaging their credit.

How AutoRaptor can help with a soft credit check

AutoRaptor has partnered with 700Credit, a leading source of credit reporting and compliance solutions for the automotive industry. Your salespeople are able to perform a soft credit check from within the software, using only the customer’s name and address. The quick check allows your salespeople to save time and fully understand how much financing their customer might be approved for when it comes time to make a purchase.

By performing a soft credit check first — and explaining to your customers why you feel it will help them in the long run — you’ll build trust and show that you’re not just “in it” to make a sale. A soft inquiry is a way to show customers you respect their credit and that you want to make sure they leave your dealership in a vehicle that is right for them. It’s a win for everyone involved.

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Ty W.
Ty W.

Ty was born and raised in the automotive world. He's an enthusiastic expert who writes exquisite content about cars, automotive sales, and dealership best practices. When not writing for AutoRaptor, you'll find Ty on the golf course.