In recent articles, we’ve investigated some of the ways we shoot ourselves in the foot in nonprime auto sales. This month, we’ll take a look at the importance of verifying customer information. It has often been said that the initial customer interview is the foundation of a nonprime sale. Verifying customer information makes sure your foundation is solid.
The information contained in the application provides the basis for your lender’s approval. Lenders evaluate applications based on the S.A.W. principle (Stability, Ability and Willingness). They fund deals based on the accuracy of the information you provide them, and your customer’s credit application begins this process.
There are few things worse than delivering a vehicle that blows up in funding because some detail doesn’t match up. If you have conflicting information, the time to get it corrected is before you present it to your lenders. Review everything, verify and then verify again.
The key is to catch problems before they happen. Bottom line: Investing a small amount of time on the front-end will pay huge dividends on the back-end. So let’s dig into the nine critical stips you need to collect from your customer, and find out what you need to be looking for to ensure your lenders are getting the most accurate information.
1. Customer ID Verification
• Does the name on the application match the name on the driver’s license?
• Is the applicant a Jr., Sr., II, III or IV?
• Does the middle name or initial match?
• Has there been a recent name change?
2. Driver’s License
• Is the driver’s license valid? Has it expired?
Many lenders will not fund a deal without a valid driver’s license. If it has expired, how long will it take to get renewed?
• What state is it from? Some lenders will not consider an applicant with an out-of-state license.
• Does the address on the application match the driver’s license? Look at the dates on the license and the credit application to see if addresses match the time periods. If the license address does not match the bureau or application address, your lender may ask where the applicant actually lives.
• Make sure you have at least three years of residence history.
4. Social Security or Tax ID Number
• Is the Social Security Number valid? Verify whether it is a SSN or Tax ID number (W-7).
• Social Security Numbers never begin with triple zero (000), eight or nine.
• Tax ID numbers typically begin with a nine. Note that W-7s may require special lenders.
• Does the year-to-date income match the income stated on the application?
• Are there additional income sources or reimbursements considered as income? Has the source been around long enough (typically six months) for a lender to consider it as verifiable? Pensions and social security income (SSI) require different proof of income, such as award letters and bank statements. Some lenders will not take SSI unless it is in the applicant’s name.
• Does the customer’s paycheck show taxes as withheld or does the employee pay his or her own taxes (1099 or self-employed)? If your customer is self-employed, you will need a different form for proof of income, such as tax returns and bank statements.Some lenders will not consider self-employed applicants.
• Are there garnishments deducted from income?
• Lenders do not accept unemployment compensation, welfare or food stamps as income.
• Are there any gaps in employment? Most lenders will consider a job gap of more than 30 days as a time of unemployment, which can kill a deal.
• Make sure you have at least three years of employment history. Too many jobs or too frequent relocation can spell instability, which can kill an application.
7. Phone Numbers
• Are the phone numbers correctly listed? Did you call the numbers to verify they are correct?
• Is the home phone a landline or cell phone? Some lenders will not allow cell phones, and may require a landline in the customer’s home.
• Does the number on the application match the number on the customer’s phone bill?
• You need at least three and as many as eight for some lenders.
• Make sure you get full name, address and phone number for each reference provided. Remember, you can use these as leads as well as references.
9. Auto Insurance
• Does the customer have full coverage (collision and comprehensive) with required deductibles?
• Have the new vehicle and lien holder been added to the policy?
Tim Shea is the president of Great Direct Concepts. He has been helping dealers grow and manage subprime/nonprime sales and profits since 1997.