Next to, “Did I get approved?” the second most common question customers ask is, “Is this the best rate available?” So how do you respond? I have a few recommendations, but let me first say that the word “best” cannot be used when discussing the installment sale finance charge or lease money factor with a customer.
What the F&I professional believes is the best rate and what a regulator, reporter or plaintiff’s attorney believes is the best rate are two entirely different things. To anyone outside the car business, the best rate is either the dealer’s buy rate or the lowest rate known to man. We believe it’s the buy rate plus “x” number of points. So any reference to the APR being the best rate available will be seen as a deceptive act on the part of the F&I practitioner.
Bear in mind, there is nothing illegal, unethical or immoral about a reasonable markup of the buy rate. The F&I practitioner, on behalf of a funding source, is competing with other funding options for the business, negotiating mutually acceptable terms, preparing the necessary documentation and conducting the required disclosures. As such, he or she should be fairly compensated for providing these services. Even the most rabid opponent of in-store funding will grudgingly concede this point; however, the practice somehow slides over to the dark side when the word “best” is used.
A greater effort might be mounted in defense of the practice if an acceptable solution wasn’t so readily available. The simple response to a “best rate” inquiry is, “If you wish to finance here, this is the rate that is available.” Nothing else should be added, because any further explanation will either create a legal liability or tip off the customer that there is something to be gained from pursuing the matter.
If the customer persists, the response should be, “Since I have no way of knowing what funding resources are available to you, I can’t make any judgment about what your best rate might be. You are free to explore your options, but if you wish to finance here, this is the rate that’s available.” The customer’s brother-in-law might be the local banker, so who knows at what rate he or she can borrow money.
As a quick caveat, stay away from discussions that tie, directly or by inference, the quoted APR to the customer’s credit history, because telling the customer the APR is based on his or her credit history is only partially true. Remember, the finance charge also includes the dealer markup at an amount based on the F&I person’s discretion.
So keep your responses simple and to the point, because any embellishments may imply that you are personally making a credit decision as it relates to the customer’s creditworthiness. In fact, adding a qualifier tagline like “and other factors” when discussing the quoted APR begs the question: What are the other factors? So, again, keep your response simple.
“If you wish to finance here, this is the APR (or money factor) that is available” does just what it is intended to do. It is to the point and free from any statement that would cause the customer not to seek a competitive comparison, as would be the case if the word “best” is used. The aforementioned statement satisfies both the legal and moral obligation to fully and accurately disclose the terms to car buyers who take advantage of the funding options you offer.
David Robertson is executive director of the Association of Finance and Insurance Professionals. Email him at [email protected]