Majority of Car Buyers Overlook Credit Criteria

An alarming number of potential new-car buyers are walking through the doors of America’s dealerships armed with cash down payments, but with no idea whether their credit score is good enough to obtain financing.

A survey recently conducted Buyingadvice.com shows that over 54% of respondents had not attempted to improve their credit score prior to a new car purchase, and nearly 65% had not requested their credit report from more than one of the three major reporting bureaus.

Likewise, 61% of those surveyed had not requested a credit report in the last three months, even though 55.5% don’t know what their score is.

“I’m not surprised at that,” said Mike Anthony long-time finance manager at Ferndale Mazda and European Auto Sales just outside Detroit.

“I’m not shocked at all that some people try to buy a car and don’t know that their credit score isn’t good enough to even get the car they want. I’ve had my share of those kinds of customers,” he said.

Mind boggling, considering a new car purchase is one of the bigger ticket items a person will purchase in their lifetime, and even more alarming given the state of America’s economy.

While Anthony says he’s sure that fear plays a part in some people not wanting to know what’s in their credit report, he also says he’s fortunate most of his Mazda customers seem well informed.

“They come to buy a Mazda and I’d say a good amount of the people who come in here are very wise about their credit score. About 90 percent, actually, are extremely literate about what’s in their report,” said Anthony.

Because of America’s wobbly economy, Anthony and other finance managers are sometimes faced with the daunting task of trying to qualify borderline buyers in effort to move units off the lot.

So as a finance manger, is it a problem for Anthony when ethics and the reality of business come face to face?

“Absolutely not,” he said, with strong conviction in his voice. “I’m not here to educate people on how to have good credit. But I have no problem telling someone that their 580 credit score won’t get them into a vehicle that takes a score in the 670 range.”

“When that happens I try to steer them to a vehicle their score will allow them to qualify for,” he said.

Much like what America’s struggling housing market is going through, automobile sales are down, while repossessions are up.

It’s part of Anthony’s job to stay in the know about economic trends, but he says he can only do so much when it comes to qualifying people who have a history of not maintaining payments.

“Of course, it’s in my best interest and the dealership’s best interest for me to use good judgment when selling a car to people that will be able to keep up the payments.”

And that’s because the banks he does business with are always looking over his shoulder.

“If I put a customer in a car and it’s repossessed in a few months, then I put another customer in a car that’s repossessed, and another, and another … the banks are going to say ‘We don’t want anything to do with you anymore.’” Anthony explained.

And because of recent economic developments financing agents at dealerships are looking at things differently when compared to last year.

“Six months ago a customer who had an income of about $3500 a month might’ve come in and wanted to qualify for a $700 or $800 car payment. Today, I might look at those circumstances differently because this economy is changing that quickly. I’ve got to stay on my toes,” he said.

Because of Ferndale Mazda’s close proximity, less than a half mile, outside of Michigan’s largest city, Detroit, Anthony gets a good amount of inner-city customers in his office.

And it’s no secret that many large cities like Detroit are faced with even bigger economic woes than several of its smaller counterparts.

Does he see a difference in dealing with the city and suburban customers?

“No, there’s no difference. The difference is in old vs. young, not urban vs. suburban,” he said with a smile.

“I’ll get an older customer who wants to … let’s say, enhance their image with a new, sportier car and they’ll want that car no matter what.”

No matter what their score is?

“No matter what,” said Anthony with a laugh.”That’s when I have to bring them to reality that they don’t have the score to get that car.

So what is the “golden rule” that finance managers live by when assessing new customers?

“Pay attention,” said Anthony. “If a manager wants to stay in this business for any length of time, and I’ve been in this business 10 years, there are certain things you’d better pay attention to when qualifying customers for a new car.”