Special Finance 101

If you’re thinking about investing in a special finance marketing program at your dealership, well, you should! As the world economy recovers and people return to normal life, special finance sales are poised for an unprecedented surge.

Since 2004, we’ve worked with thousands of dealers across the United States and have come to realize there isn’t a single, “correct” way sell more cars in special finance. There are probably nearly as many methodologies as there are dealerships. That being said, the highest grossing Dealerships all understand and maintain these 10 key components for sustained profitability in special finance.

1) Commitment

• Starts with the dealer principal and includes entire sales team
• Must understand capital required
• Conventional F&I and used car manager/buyer are keys

2) Inventory

• 80% of payments under $400 per month
• 80% of inventory must be $7-$12K ACV, $500 behind average book
• Under 60,000 miles
• Sweet spot is $10-15K
• Pickups & SUVs, the more the better

3) Personnel

• Must be committed to working the program (see #1)
• SF Manager must have good deductive reasoning
• SF Manager must be able to look at application, bureau and already know where a customer should qualify
• Must work as a team to deliver vehicle

4) Finance Sources

• Need enough to cover all niches
• Today’s hero can be tomorrow’s zero
• Maintain strong relationships through good times and bad
• 85% of business will generally go to five or six companies
• View our Subprime Lender Directory

 
5) Telephone & Engagement Skills

• Make sure you have a dedicated point of contact
• Don’t pull credit before talking to customers
• Call every lead, regardless of perceived strength
• Combine voice, email and text in a coordinated effort
• Take advantage of new customer engagement technologies
• Goal is to set an appointment that will be kept
• Develop rapport, don’t interrogate
• Don’t tell them they are approved
• Don’t build barriers in the customers’ mind

6) Sales Process

• It is still about selling financing
• Must determine good credit/bad credit before vehicle is selected
• Attempt to show vehicles that fit customer’s credit profile
• Once on proper vehicle, resume normal road to sale

7) Deal Structuring

• Calculate maximum vehicle advance and add down payment to net max sales price
• Maximize the front-end gross, then the back-end
• More down payment equals more gross profit

8) Marketing

• Advertising goal should equal 10 percent of front-end gross profit
• Choose a quality lead provider – Quality not quantity
• One hundred quality leads create 10 sales on average
• Internet leads are still the lowest cost per sale
• Measure your results to maximize your ROI

9) Compliance

• No deal is worth the dealership!
• Privacy policy must be given whenever and however gaining personal, non-public info during a credit transaction
• Check everyone against OFAC list
• Vet your lead providers and make sure they are not leaving you exposed

10) Tracking Systems & Accountability

• Allows you to keep a handle on all the moving parts
• Inventory management—You need to be able to select right vehicle quickly
• Lead management—Track your leads! Carry-over sales will close 60-90 days later
• Funding—Benchmark is seven days from delivery to funds in bank