Instead of financing a new purchase, online used-car retailer Vroom chief revenue officer Scott Chesrown says a pre-owned purchase is an answer to a consumer weary of investing in a new-car and due to the rate of depreciation after just a few years.
“When you purchase a pre-owned vehicle, especially, high-quality pre-owned cars at great financing rates, I think you protect your investment — much more than if you were to get a great financing rate on a new car that depreciates, according to Edmunds, on average about 10 to 15 percent when that car leaves the lot,” Chesrown said during a phone interview with Auto Remarketing.
“What we try to do from a finance perspective is make sure consumers aren’t locking themselves into some bad decisions,” he said.
Vroom currently works with a portfolio of more than 30 lenders that the company pairs with its pre-owned customers.
“We established relationships with lenders in kind of a traditional way, just reaching out to them and picking out the relationship.”
Chesrown said Vroom does nothing different than most car dealers could do.
“The difference is that as we’ve continued to grow in scale, the process that which we put our vehicles through from a reconditioning standpoint and the way we certify the cars,” he said.
“The growth plus the quality of vehicles has allowed us to really develop those relationships a little bit further to make sure that we can offer the best rates to our consumers.”
Vroom’s partners feel comfortable lending money, on the vehicles the company offers given their quality, according to Chesrown.
He said, “It’s very much an indirect model that you find at most dealerships; you just expand and make sure that you’re working with the right lenders so that you can service all ranges of credit.”
In a departure from some traditional dealers, there’s no negotiating that goes on at Vroom. The online retailer can provide finance rates within minutes of a shopper visiting the site.
“We try to bring our best foot forward with the consumer and give them our best possible rate up front; as a result, the finance terms that we get are consumer friendly,” Chesrown added. “When you work with good finance sources such as Capital One and big players that is the benefit we bring with kind of having that marketplace approach.”
There are different ways a consumer can secure financing. A consumer can start the process by visiting Vroom.com and going through a pre-approval process integrated with Capital One.
Consumers are asked to fill out a credit application, and once complete, they can receive a real-time offer back on a vehicle.
Chesrown said this uniquely allows Vroom to help consumers make educated finance decisions without hurting their credit.
“Everything comes in through our back-end system, and we score the credit against where we know fiscal lenders perform,” he explained.
Vroom then submits each credit application to up to three different lenders that it determines should align with what lenders typically offer based on the credit profile and asset class of the consumer.
“It’s a competitive process — it’s almost like a marketplace — the banks know that we’re not giving priority to any which one bank, but they’re doing that bidding for that consumer’s business and as a result, we end up getting really attractive finance rates for our consumers,” Chesrown added.
He said most car shoppers either want to know what they can be approved for and the current value of their car, so they can determine whether they want to make a purchase.
The company even offers consumers the ability to take a few photos from their phone and simply scan their VIN to receive a guaranteed offer back in minutes.
If a shopper favors a more traditional route or they’re just interested in understanding their financing options, they can create an account on Vroom.com to begin the approval process.
“We ask a couple of questions on the credit application. It’s all secured, and at that point, we either give them a pre-approval back from Capital One, or our credit team in Houston, who reviews all applications that come through our processing center,” Chesrown said.
Though all transactions can easily be done online at a consumer’s pace, he said Vroom makes its team available to speak with shoppers on the phone if they prefer.
“We find a lot of times customers want to speak with us on the phone because it is an expensive transaction even if they’re doing the transaction totally online,” he added.
“Typically they want to have a few questions answered, and that’s where we make a team available to speak with the customer and answer any finance related questions should they arise.”
Additionally, from a compliance perspective, it’s really important that Vroom not store any sensitive information and makes sure lenders, secure information for consumers, according to Chesrown.
“I think that’s critical,” he said. “When consumers create accounts we have things such as name and email address, which is all encrypted.”
Consumer information is secured offsite through security measures, and Vroom has a team in place that focuses on security, both electronic and physical.
“When you’re processing titles and things along those lines, you have paper. It’s one of those facts of doing business in the automotive space you know you will have paper to some extent in order to process a transaction,” Chesrown added.
Vroom also has team members responsible for making sure that the company follows proper protocols, such as how employees discuss information with consumers over the phone, which entails verifying their identity before speaking about anything else.
“It’s probably the most critical piece in our business; especially with our volume, we need always to make sure we are tight on compliance,” said Chesrown.
“I think the biggest way to focus on that is eliminate the amount of sensitive information you hold on a consumer, so that’s where being a technology company has really helped us make sure that we’re not printing out unnecessary information you might find at car dealerships.”