Financing Cars Bought Online

By Jill A. Keck, Attorney

As the internet shopping craze spills over into the purchase of vehicles, leaders in the auto lending market need to get on board for the ride.  Online shoppers agree that making purchases, both big and small, can save time and money.  All it would take for a credit union to succeed in this arena would be a little marketing and education.  Credit unions already offer their members the lowest interest rates on auto loans than any other financial institution and especially lower than dealerships.  The problem is that many members are unsure how to purchase a vehicle online and still finance it through a credit union.  This is where the credit union needs to market to current and potential members of not only their low interest rates but also their services to walk the member through the process of locating and selecting a vehicle to purchase online, obtaining the financing through the credit union.

How does a member purchase a vehicle online?  Purchasing vehicles online is a fairly simple process when the person has been given some basic steps.  First, the member should get an idea of how much car he can afford.  It is important to know the prevailing annual percentage rate (APR) for an auto loan.  Also, keep in mind insurance and fuel costs.  If possible, the member can even prequalify for a loan. 

Second, the member needs to research different vehicles and make a list of which ones fit within his budget and that he thinks he wants to buy.  This can be done any day of the week and at any time.  There are no car salesmen breathing down their neck while browsing.  The member can scan numerous online dealers and auction companies within a matter of minutes, comparing makes, models, color and other options.  The best part is that it can all be done in the comforts of the member’s own home.  They should keep in mind that the location the vehicle is stored should not be too far from their home.  It is recommended that the radius be no more than 20-30 miles from a member’s home to make the next steps in the process easier. 

Next, they should go test-drive several of the vehicles on their list to possibly narrow their options.  I know this sounds old-fashioned and seems to obliterate the advantages of shopping online, but getting behind the wheel and driving can tell the member a lot about whether a car is going to meet their needs and desires.  

After test-driving, members should go back and research the specifics about the cars remaining on their preferred list to make sure he/she is making the right choice.  There is a lot of information about vehicles online, right at the member’s fingertips, including Kelley Blue Book pricing, safety testing results, ratings, and so forth.

The next step in the online process is to compare prices at several different online dealers and auctions to find the best deal.  Because the sales departments of online dealers and auctions are paid based upon the number of vehicles sold instead of commission, they understand that members are looking for a fair price and thus, sales move along fairly quickly.  In addition to the actual sales price of the vehicle, members can work out the smaller details such as extended warranties.  Now members can go back to the credit union to apply for a loan, or if already prequalified, sign for the loan.
 
The final step is the financing, which should be the easy part for the credit union since the financing of vehicles is already a service provided to its members.  The process to finance an online car purchase is not really any different than the financing the credit union provides for vehicles purchased by a member from a car dealer.  The member applies for a loan, the credit union processes the application and if approved, issues the loan. 

If the credit union currently only processes auto financing at its branches, it should consider having an option to process the loan online.  Not only will that appeal to many of the current members who are purchasing vehicles online, but it will also market to new members who are in the process of purchasing a vehicle online and are looking for the best financing options.  Online financing keeps in line with many of the benefits offered by purchasing a vehicle online, including the fact the member can do so from the comforts of his own home at a time more convenient for him.

Jill Keck is an attorney of Consumer Collections in the Cincinnati office of Weltman, Weinberg & Reis Co., LPA (WWR) who can be reached at 513.723.2205 and jkeck@weltman.com.

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