What Makes Special Finance So Special?
by Geoff Cohen
Many of you are sitting there reading this thinking just that thought. What is it about special finance that makes it so special for your dealership?
The answer to that question is indeed one of the great mysteries of the auto business. Why is it that some dealerships do special finance extremely well and profitable, while others just can’t seem to get IT?
I typically hear these dealerships crying, “It’s too hard” or “There’s too much brain damage”. Well, if it were easy, they wouldn’t call it special! Anyone with a computer and access to Dealer Track could do Special Finance, and in some cases, that’s probably how it gets done in some stores. But in reality, is the easy way necessarily the best way? Are you getting the most out of your special finance department, or is it the orphan stepchild of your dealership, stuck away in a cold, dark corner, out of sight and mind until all other methods have been exhausted.
The first thing to consider is how do YOU define special finance? Do you use Beacon or FICO scores to determine who gets your business? Is it determined by whether the lender charges a fee or requires any stips? Do you leave it up in the air, and decide on a deal by deal basis? Consider that, if you are using any kind of lead generator, they typically use a credit score of 640 or below as their main criteria, so maybe you should consider this as well. While there may be cases of a sub-prime FICO score getting bought by a primary lending source, these are few and far between, and in many cases, may not be you best call because the lender may limit the amount you can sell the car for (advance).
Why should you treat your special finance department …SPECIAL?
· Primarily because “if you’re not in it for love, you’re outta here!” You have to love the fact that this is extra business that you might not have done. These are some of the most pliable as well as loyal customers you can find, and if you give them just a little attention, they grow into a sizeable profit for you.
· You have to love the fact that special finance gives you an outlet to retail some of those trades you might have wholesaled to someone else who ended up making a nice profit selling these customers.
· You have to love the fact that, done properly, special finance deals that include mechanical breakdown insurance (MBI) contracts create additional income for your parts and service departments.
· You have to love the fact that today’s special finance customer may be tomorrow’s prime customer; wouldn’t you want them back as easy repeat business.
Do you ever consider these customers to be free residual business in your sales, parts, service and your body shop as well? In addition, they become so of the best “good will ambassadors” for your dealership that you never hired!
How do treat your special finance department?
Do you even have a separate special finance department?
This is an issue we will address later on. Right now, I want you to think back to the early to mid 1990’s, when every dealer in America was jumping on the leasing bandwagon. Leasing and finance were two separate entities in most dealerships. Your leasing manager was one of your most valued and highly paid employees. He was your negative equity problem solver, low payment specialists, high profit generator who drove the most expensive demo you had and you treated him like a king. He knew every leasing company out there, and could write you advertising copy that would fill your dealership to capacity with customers looking for those ridiculously low monthly payments. Your service and parts department loved him as well, because of all the accessories he used to install on the cars he leased. And then one day it all changed! What ever happened to him when leasing software came into your store, and suddenly everyone could calculate a lease and most of the leasing companies we knew and loved went out of business? Well, if he was smart, he went into special finance!
Today’s special finance manager is a lot like yesterdays’ leasing guru. He has to know who has what programs, buys what paper, likes what kind of customer, He has to know all this and make a profit from the worst of the worst customers, and if he’s good, he smiles all the way to the bank. Think about how much bottom line he generates for your dealership from prospects that you probably wouldn’t have even considered to be a customer in the first place. Wouldn’t you agree that makes him pretty special for your dealership as well? Are you really supporting a sub-prime department, or do you simply let it exist; hoping it won’t cause you any headaches?
If you truly want the best for your health, wouldn’t you seek out a specialist? For legal advice, don’t you consult an attorney who specializes in the precise legal problem you have? You wouldn’t consider buying real estate from your parts supplier, so why wouldn’t you have a specialist handling your sub-prime business in your dealership?
When was the last time to actually gave your special finance department a complete physical? Do you meet regularly with your special finance staff to keep up on the latest developments? Do you know enough about what goes on in your special finance department to survive a mass exodus of personnel? Do you have the right mix of personnel, lenders, and inventory? Are you using the most effective business systems? Is your marketing plan still working, or has it become a bit anemic lately? Has the “special” gone out of your special finance department? Maybe it’s time for an annual check up.
