Affordability assessments that can benefit you and your customers

Over the past few years, the guidance from the regulatory bodies has become increasingly clearer for the automotive industry when considering their customers’ ability to pay. If we look back as little as three years, we can see an industry, like others, where largely the customer journey and on-boarding process operated with limited consideration to a customer’s capacity to pay. This has changed and the importance of affordability is now front of mind for all areas of the industry.

It goes past the simplistic view of understanding an individuals income and stretches into the complexities of how that contributes to disposable income. This calculation can be complex, pulling information from different sources at different stages of the customers journey.

Let’s consider how through lenders interpretation of the regulatory guidance, a balance of fair assessment with the demands for a friction-less┬áprocess, can be achieved through external services.

With the complexities of the customer journey, which can include dealerships, brokers and aggregator platforms, how can we help the consumer and lender feel comfortable that the finance provided is affordable?

Real Time Bureau-based Affordability Assessments

Where income is captured as part of the on-boarding process, there are data sets available to validate the accuracy of this information. Understanding the validity of an individuals income can be challenging, so making use of robust external data sets and models can improve the quality of decisions and customer experience.

With this step complete, it is then important to bring this understanding into a wider appreciation of a an individuals disposable income. All phases of this process can be supported by Experian, where data assets and models are combined to provide valuable insight in the process.

If income is not captured as part of the on-boarding process, it is still possible to utilise some of the most accurate data assets to better understand an individuals ability to pay. Through Experian’s EDI RAG solution, a lender can understand if the extension of an individuals credit line is affordable in relation to their disposable income.

Consumer Consented Data

Through a combination of regulatory influences, new technology and an increasing acceptance from consumers to consent to share data in lending decisions, Open Banking is now a real opportunity for the automotive industry to build on their processes and understand the most comprehensive view of a individuals ability to pay. Where appropriate, a summary of bank account data over a statistically significant period can reduce a lenders uncertainty about an individual’s capacity to pay new monthly credit commitments.

Through Experian’s Affordability Check, it is possible to quickly assess how much disposable income an individual has. It allows you to delve deeper into the spending patterns of the customer, so you can fully understand how they manage their finances. This has obvious applications within new business on-boarding, but also offers benefits in the collections arena, where it can significantly improve accuracy and speed in the Income & Expenditure process.

Experian are well placed to offer a range of affordability solutions which help organisations improve the accuracy of the affordability assessment and the customer experience. From real time bureau-based solutions through to consumer consented categorised data, Experian have a solution to fit each organisations needs.

Alastair Luff, Managing Director, Consumer Information Services, UK & Ireland

In the automotive sector, the way a consumer chooses the product and then proceeds to finance it, is like no other. From within dealership, through a broker, into a lender and then back to the dealership, this provides unique complexities.

Maturing market solutions are now available for the automotive industry to deploy in a complementary way to better address the understanding of consumers. In time, it is widely accepted that the adoption of consented data will become widespread, so by building the foundations of this process to support the consumer movement, the automotive industry can embrace change and achieve competitive advantage. Experian have all the building blocks to help clients develop a strategy that best suits their individual needs in a compliant manner.

To find out more about how affordability assessments can benefit you and your customers, get in touch with the Experian team by emailing, download our whitepaper or visit our automotive website.