"Building Successful Special Finance Departments" -  Part  3
In the July/August issue I discussed details for immediate improvement of the special finance department. This article will discuss lender relationships and managing 800 or Internet leads for success.


Lender Relationships, More Important Now Than Ever:

As the sub-prime finance arena continues to consolidate, relationships between dealerships and lenders is more critical than ever before. The consolidation and shake out with sub-prime finance companies will continue through the remainder of 1999. As more companies review their loss ratios and cost of doing business many will terminate dealerships with poor loan performance or above an average cost for originating loans. Dealerships should implement internal policies for managing lender relationships. These policies should include, look to book ratios, funded to approved, percentage of clean deals sent for funding, fraud or misrepresentation, number of first payment defaults and overall portfolio performance.
Lenders are maintaining better records today than ever before and conduct regular meetings to improve loan performance and reduce operational costs. Successful special finance managers know this and work daily with their core group of lenders to insure compliance. The day of burning bridges with numerous lenders or trying to manage relationships with every lender available is over. Professional special finance managers use 3 or 4 core lenders with whom they can build long-term relationships. Consider the following for building good lender relationships.
  • Utilize a core group of lenders with non-overlapping programs.
  • Know the guidelines and do not submit applications that will not meet minimums.
  • Request performance numbers from each lender.
  • Strive to raise the funded to approved ratio.
  • Stop "shotgunning" applications! Need I say more?
  • Learn to give and take when rehashing turndowns.
  • Solve funding problems immediately. Consider hiring a full time funding clerk.
  • Meet senior management with the lenders your dealership uses. This can be valuable when problems arise.
  • Conduct proper interviews! This will make the approval process much easier.
  • Ask for funding training and assistance from lenders.
  • Visit lenders. This allows everyone to put a face with the name and voice. Lenders appreciate dealers who take time to visit the operation center and see how processes actually work. Lenders are faced with numerous compliance issues that must be met on each loan. The more you know and understand the stronger your relationship will become.
  • Prior to complaining about underwriting or funding make sure you have accurate records. Often times special finance managers and finance employees have strong personality conflicts. When this happens discuss the facts with senior management of the lender and request assistance. Lenders do not want to lose good dealers over conflicts that can be corrected or changed.

    • Managing 800 and Internet Leads, Avoiding Lender Problems:

    Leads received from 800 numbers and the Internet are quickly becoming a sore spot for senior managers at banks and sub-prime lending institutes. Dealerships who submit applications from lead generating services without interviewing the customer first, rarely end up becoming a funded deal. Numerous lenders have made recent provisions not to accept unsigned applications because of this problem. Consider the following when working with 800 and Internet leads.
  • Contact customers immediately, verify information and make appointments with those who meet minimum guidelines.
  • Advise customers to stop "dialing for dollars" with other 800 numbers because it affects the number of credit inquiries. Explain the importance of coming in for an interview to determine the vehicle they qualify for.
  • Maintain a contact manager computer system for all leads to insure proper follow up. Many customers who do not qualify today will in the near future. Leads are a terrible thing to waste.
  • Review the script being used regularly. Lender guidelines change and if the script does not take into consideration the new programs you may eliminate potential buyers or receive leads from prospects that do not meet minimum guidelines.
    • In closing, management of a successful special finance department requires setting up operational procedures for lender relationships, reports, lead management, sales procedures, interviews, funding and referral customers. In the next article I will address making the most of 800 and Internet leads plus increasing referral sales.

    Good Selling,