From VOISYS by Dick Hassberger
In my last offering, I promised to cover what I consider to be the basics of establishing and operating a Special Finance program. I explained that, in my mind, there are three basic areas that contribute to the success or failure of Special Finance in the average dealership, Commitment, Knowledge and Inventory. Other writers have expressed their opinion that there are anywhere from 6 to 15 of these “basics.” Quite personally, my philosophy has always been that the more “basics” that we list, the less basic each becomes! But again, that is just my opinion. I have discovered, in outlining this follow-up article that it is going to take a lot more to cover each of these basics than the space I have for a single article. So, stay tuned!
Commitment is, without a doubt, the foundation of a Special Finance component in any dealership. It is also, it would seem, the most elusive of the basics of Special Finance to quantify. Any Special Finance operation launched without a strong commitment from the owner/management of the dealership is, metaphorically, like building a house on a foundation of sand!
It is so important and it is, in fact, the foundation of our profession. That is why it is the subject of endless articles and conversations? It is, I think, because so few SF professionals operate under the canopy of true commitment. While much lip-service is paid to the concept of total commitment, there are fewer instances of true commitment. Why not? Well, the real reasons are going to be elusive, but I think that we can discuss a few examples. Perhaps fear is the most prevalent commitment killer. Fear of failure and its consequences! Fear of the unknown! Fear of reputation loss! Fear of change within the dealership! And perhaps as important as the others, fear of the necessary investment to start up a Special Finance department.
Of all of these, the fear of investing or, in many cases, the lack of working capital, is the most compelling case for not making a commitment to Special Finance. It does take working capital to make money in Special Finance. SF is always an excellent investment, in my opinion, but always a risk, none-the-less. First and foremost, Special Finance requires an investment in hardware and software systems, advertising and/or lead generation, additional inventory, and personnel. But not to be ignored is the capital necessary to offset the longer funding time that is traditional in the Special Finance business. Can a dealership afford the cash flow lag which can amount to $8000 to $10,000 per vehicle delivered? Granted, we are only talking about a few extra days, but, through these past 3 or 4 years, I have known of dealers where days, and even hours, are critical when managing the bank account.
If you are a Special Finance professional or a dealer involved in the conceptual stages, or trying to improve the profitability of a Special Finance operation and you hear or say the words “Lets see how it works before we commit to that expense (software, inventory, advertising, etc) that should be a very clear signal that commitment may be lacking.
While we will spend more ink on the subject of commitment in the next few weeks, I stand by my belief that one cannot build a structure on a foundation laid in the sand. The foundation of a successful Special Finance operation requires a rock solid foundation of commitment.
Just my two cents worth!
About the author
Dick Hassberger, of Lake Orion, Michigan is a veteran of over 50 years in the Automotive Financing and Leasing industry, starting his career with the former Wayne Oakland Bank in September 1960. Dick is National Sales Director for VOISYS. He has held executive positions with Major Banks, Lending Institutions and Leasing companies and has accumulated a vast store of knowledge in the automotive financing industry, which he regularly shares with his client dealerships as well as readers of this blog. Dick was a regular author for World of Special Finance Magazine.