By Scott Johnsen, National Business Development Manager, RouteOne LLC
In this economy, it’s imperative that dealerships take advantage of every opportunity to get customers financed. Each deal is unique, but the best way to fund each and every deal is to pay attention to the basics. Let’s focus on a key tenet: your finance source selection and partnership.
Know the finance source policies. Knowing and following your finance sources’ guidelines for receiving applications can make or break your approval success rate. Additionally, understanding how to package your final deal will also speed your funding. Find out your finance sources’ policies regarding cash down, credit scores and scoring models, model year/mileage restrictions, PTI, and LTV. What about the lender’s book value (which book do they advance on?) Is your value accurate?
Verify contract accuracy. Verify the accuracy of your contract prior to submission to the finance source. Are you sending the customer application to the finance source most likely to fund that candidate? Check customer quality, vehicle selection and advance sought.
Create a complete funding package. Know the stipulations prior to delivery. Always create a checklist, whether packaging the deal on your own or providing to a clerk. Make sure you include all relevant data. Verify all stipulations prior to sending, and verify that all standard documents are included, complete and accurate. For example, a promissory note for $500 down could cost you time and effort to track down, maybe even a $500 write off. The missing stipulations for POI could cost your dealership $25,000 in funding, or worse, loss of an approval due to expiration - not to mention the frustration if the bank decides not to re-approve.
Ensure your customer meets program guidelines. In times past, ’cash was king’. This is not necessarily true anymore. It’s possible that your customer could meet 99 percent of minimum program guidelines – but missing that one percent could cost you the deal! So make it easy on yourself. Don’t submit a deal with $250 cash down knowing the program minimum is $500. You may not receive a counter offer for an additional $250 down - you may just receive an “automated turn down”. (Did you know some finance sources have policies which prevent them from rehashing a turndown?)
Avoid “shot gunning” deals. Shot gunning does not work to your advantage or speed your process. Actually, it does just the opposite. These days, finance sources are very tightly managing risk and cost. As a result, look to book and risk portfolio management are more critical than ever.
Build relationships. It’s important for you, the dealer, to build a solid relationship with your lenders. Get to know them and request that they provide you or your staff the training, education or feedback needed to have a successful partnership.
Be accurate. Avoid vehicle value errors or ‘power booking’, ‘grossing up,’ or otherwise enhancing the truth. It may seem harmless to round up an applicant’s income to the nearest “x”, or even provide a luxury vehicle with all of the bells and whistles, but it is not in either your, or the finance sources’, best interest. Your customer could have provided an application for credit using a different income at a different location, thus creating a discrepancy. This could delay your approval, create additional stipulations or worse, cause a decline.
Additionally, many finance sources are now completing their own customer interviews, either at random or generated based on the finance source’s risk assessment of your dealership’s performance or repossession rate. The ‘power booked’ car may have provided a nice advance and appearance of profit to your dealership, but if a discrepancy is found, you could be charged back, or even lose a finance source.
Most importantly, communicate with your lenders at every turn. It’s never too late to be a great partner. Good selling!