How to use generative AI to reduce friction and convert car buyers

Hispanic consumers represent a significant economic force in the U.S. today. Yet, they often face barriers in accessing mainstream financial services, particularly when purchasing vehicles essential to their household mobility and economic opportunity.

To address these barriers, we are testing a generative AI-powered pre-approval bot to help potential car buyers confidently navigate the loan process without the intimidation of sharing private information. This innovation aims to foster trust and streamline access to vehicle ownership for Hispanic consumers, supporting their journey into the financial mainstream.

Hispanic consumers: An underserved market ready for innovation

If U.S. Hispanic consumers were their own economy, they would rank as the fifth largest in the world by GDP. However, about one-third of this population is underserved by mainstream financial institutions due to their lack of credit scores or lower incomes. This creates significant challenges when purchasing vehicles — a necessity for most households — leaving many vulnerable to predatory used auto retailers and lenders.

Over the years, Tricolor (where I serve as the company’s Chief Strategy Officer) has successfully used AI and machine learning to enhance multiple business operations, including supply chain management, marketing, underwriting and customer support. This technology enables the company to effectively serve this specific demographic with high-quality vehicles and affordable loans. These are good credit risk customers; they simply present in different ways.

However, many potential customers are intimidated about sharing private information or applying for loans, often influenced by concerns about immigration status or financial standing. To address these challenges, we are testing a generative AI pre-approval bot to overcome these objections and convert more customers. This AI innovation will help underserved Hispanics enter the financial mainstream in the U.S.

Dig deeper: 3 ways to use data analytics to connect with Hispanic consumers

Why preapproval? 

Preapproval is a crucial step in the vehicle-buying journey for customers with poor traditional credit or low incomes. They need to determine “How much can I borrow?” and “What’s my down payment?” before considering their vehicle options. 

Many have previously fallen victim to predatory auto dealers and lenders, making them fiercely protective of their privacy. As a result, the traditional pre-approval process, which often requires sharing financial information over the phone or in a dealership, can be a significant barrier.

We understand that when people feel comfortable and secure, they are more likely to engage in and complete the pre-approval process. Gathering information, conducting a quick analysis and providing an initial pre-approval loan amount in a private setting aligns perfectly with the capabilities of generative AI. 

To this end, we developed an AI preapproval bot as a front-line engagement tool. Powered by advanced AI and data encryption, this bot allows consumers to interact confidentially and conveniently without needing to share sensitive information with a human or in front of others.

Design considerations 

The design process prioritized a customer-first approach, drawing insights from multiple sources: customer experience surveys, interviews with retail staff and direct purchasing experiences. Our comprehensive research revealed six critical features essential to addressing potential applicants’ needs and concerns.

1. Confidential interactions

• The bot is a secure environment where users can respond to questions that may otherwise feel intrusive or uncomfortable in traditional settings. As a result, consumers are more likely to feel confident providing the necessary information.

2. 24/7 availability

• Whether during a lunch break, after work hours or late at night, consumers can begin or complete their pre-approval process wherever and whenever it suits them.

3. User-friendly design 

• A sleek, intuitive interface simplifies what can be a long, laborious offline process. Instead of sifting through long forms, the bot interacts using a conversational format, guiding users step by step.

4. Immediate feedback

• The pre-approval bot gives consumers near-instant feedback on whether they are likely to be approved, allowing them to make more informed decisions without unnecessary delays.

5. Secure data handling

• Security and data privacy are a priority. State-of-the-art encryption protects any sensitive information shared by the consumer, ensuring their data remains confidential and safe from potential breaches.

6. Relevant communication channel

• WhatsApp was chosen due to its widespread use among the Hispanic community, end-to-end encryption and higher likelihood of converting customers than directing them to a web form or online application.

It was also crucial to address potential drawbacks of large language models (LLMs), including hallucinations and generative AI’s difficulty with math functions. Key design strategies included:

• Limited interactions to a prebuilt form, preventing users from deviating from predefined fields and formats.
• Narrowed the scope of the AI agent by:
  • Training it only on internal pre-approval FAQs and CRM.
  • Prohibiting it from engaging in conversations outside the context of a pre-approval application.

Dig deeper: How to build interactive applications with generative AI

Launching live

Transitioning to an automated interface for pre-approvals has significantly reduced friction in the application process, creating a more user-friendly experience that enhances the likelihood of conversion. This shift is expected to result in a 17% increase in lead-to-application conversions and a 29% increase in lead-to-sale conversions.

Testing of the pre-approval bot is currently underway in select markets, with plans for a nationwide launch in 2025. This initiative is part of a broader strategy to enhance efficiency and personalization in the consumer journey. Future developments will include:

• The integration of more advanced AI capabilities.
• The introduction of additional services through similar bots.

By combining technology with consumer-centric solutions, our goal is to transform the auto finance experience and set a new standard for expectations in the digital age.

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