Dealers use a consumer’s credit score as the cornerstone for financing decisions. But this last year has shown how it can be a lagging indicator. However, there is a solution to this challenge: verified income and employment data, which I discussed in our webinar, “Benefits of Income and Employment Verifications at the Dealership.”
Challenge #1: Consumer Doesn’t Supply Pay Stub
As you know, when a consumer fills out an application, the lender begins the sales process by pulling their credit report. From there, the process can take one of two paths. The successful path is that the lender pulls the VOE/VOI instantly and can make a decision. As a result, the consumer is approved quickly and drives away in their shiny, new car.
The other path leads to the lender pulling credit and then asking the consumer for additional documents. The consumer is inconvenienced because they have to drive home to find a pay stub. So, they may or may not do this. If they do find a pay stub and the lender approves the decision, the consumer buys the car. But that same consumer could leave the car lot and never return, which results in a lost deal.
Challenge #2: Fraudulent Documents
Worse yet, the consumer could provide a falsified pay stub, W-2 or bank statement. Some lenders we have spoken to say about 20% of the pay stubs they receive have been fabricated. While the Federal Trade Commission has shut down websites that create fake pay stubs, they do still exist. In fact, there are more than 160 websites where anyone can generate falsified pay stubs — all you have to do is Google “pay stub generator” to find one.
Challenge #3: Inaccurate Income Data
About the same percentage — 20% — of consumers admit they have misrepresented their income on an auto application. This doesn’t necessarily mean the information is fraudulent; the consumer may have understated income on purpose or simply been uncertain.
Equifax conducted its own study of our database by comparing information reported on applications against verified information specific to the auto industry. We found 52% of auto applicants misrepresented their income by 20% or more. This is significant not only because 38% of those applicants overstated their income, but those applicants are far more likely to be 60+ days past due on their loan.
The Solution: Income and Employment Data
The Work NumberⓇ provides credentialed verifiers with access to over 114 million active payroll records. The income and employment data comes directly from more than one million employers and is updated each pay cycle.
4 Benefits of Using Income and Employment Data
Dealers are able to grow their business through the use of verified income and employment data like the Work Number. In fact, while lenders typically close 34% of their auto loans, that percentage jumps to 48% when they use the instant verification by The Work Number, according to our study. That is a 40% increase in conversion rates — and cars and trucks rolling off the lot.
But there are other benefits to using this data. Here are three of the most important:
Employer Provided Information – Unfortunately, when many consumers fill out their application, they don’t know their exact income data — or don’t want to reveal it. Dealers and lenders can rest assured that the employer-provided information is accurate.
Low Friction – You want your customer to have a speedy, easy time at the dealership. So if you have to send them home for a pay stub, there’s a chance they won’t come back. With instant verified income and employment data, the lender won’t need to request additional financial documentation. And if you can send better qualified buyers to your lender, you will strengthen that relationship that you depend on.
Excellent Customer Service – A quick, easy buying process is great customer service and what consumers today expect. If you can provide a great experience, they will more likely return to your dealership for future purchases.