Groupon: A Direct-Lending Solution

One of the biggest hurdles to making direct lending work is the threat of consumers being “flipped” to other financing sources while at the dealership.

With direct lending, the customer comes into the dealership with check in hand, ready to buy a car. Often, though, the dealer persuades the car buyer to go with another financing option. Typically, direct lenders have little control over this “flipping.”

But I recently read about a Chicago real estate broker, Yuval Degani, who used discounter Groupon to lure customers, and I wondered if that strategy might work for auto finance.

Degani, president of Dream Town Realty, offered $1,000 cash back to any buyer or seller who lists or closes a deal with his firm in the next two years. The cost: $25.

Might direct auto lenders offer a similar program? Consumers who are pretty serious about buying a car in the next year, let’s say, would shell out $25 for some kind of discount on their financing (or some alternate incentive, like a few hundred dollars of gas credits).

Tags: direct, direct-lending, groupon

Replies to This Discussion

Permalink Reply by Jeff Cook on April 14, 2011 at 11:43am

Interesting concept. There is a revenue component for the finance company on the front end too. I cannot imagine this would be the case, but are there any brokering concerns in doing something like this on new cars?

Permalink Reply by JJ Hornblass on April 14, 2011 at 11:58am

I like the idea, but the key to Groupon is that a certain number of consumers must take the discount -- that's the "group" part of "Groupon." I would suggest relief on upfront fees.

Permalink Reply by Marcie Belles on April 14, 2011 at 12:31pm

I'm not sure about brokering concerns or whether there might be other legal ramifications, but I'd be interested to hear about those. And as for the "group" part, the Dream Town Realty Groupon has generated 194 buys so far (with another 3 days left to buy). It tipped at 50. So I'm pretty sure an auto finance Groupon would garner a big enough response.

Permalink Reply by JJ Hornblass on April 14, 2011 at 1:34pm

Fair enough, Marcie.

Permalink Reply by Steve Rabago on April 15, 2011 at 11:36am

I like the idea - we might give it a try at www.zimplemoney.com and www.zimpleauto.com. Until this example of how to use Groupon, I could not quite figure how I could ever use it. But I do like the idea!!! Thanks for passing it along Marcie.

Permalink Reply by Marcie Belles on April 15, 2011 at 11:40am

Great, Steve! Keep us posted...

Permalink Reply by Marcie Belles on July 12, 2011 at 2:38pm

Check it out: Detroit auto dealership LaFontaine Auto is offering a Groupon good for $500 off the purchase or lease of a new or pre-owned vehicle. The cost: $199.

Here's the link to an article about it: http://www.reuters.com/article/2011/07/12/us-groupon-cars-idUSTRE76...

Let's see how many get sold...

Permalink Reply by Mary Wisniewski on July 13, 2011 at 11:54am

This is cool! My parents get their cars from this dealer.

Marcie Belles said:

Check it out: Detroit auto dealership LaFontaine Auto is offering a Groupon good for $500 off the purchase or lease of a new or pre-owned vehicle. The cost: $199.

Here's the link to an article about it: http://www.reuters.com/article/2011/07/12/us-groupon-cars-idUSTRE76...

Let's see how many get sold...