Setting up Special Finance Procedures - Step Four: Lender Relationships

The process of establishing a viable Special Finance Office began by focusing on the hiring and training of qualified staff.  The next steps in the process were customer-related: using effective marketing strategies to target the special finance demographic, and stocking the dealership with inventory available to the non-prime market.  The next step in the process is building and maintaining positive relationships with multiple lending sources.  This is an integral part of a Special Finance Office’s success. After all, no matter how hard you work or how proficient you become, you won’t be successful unless you have a strong support network with your service providers. Without this support, a Special Finance Office has virtually no chance of achieving its ultimate goal: final approval and funding.   Establishing and managing the proper lender relationships will put your Special Finance Department on the map.

Many finance managers choose to see lenders as unimportant or secondary to the overall process, or as simple service providers. The truth is, unless you have the assistance of these essential people, you cannot attain your goals. Their attitude toward you significantly affects their attitude toward your loan packages. By treating these providers in a respectful, friendly and considerate manner, you will establish a positive relationship, build rapport and create an overall spirit of cooperation.

Every dealership must have the proper mix of non-prime lenders that purchase contracts covering the full spectrum of sub-prime paper. Typically, they should be working with 6 to 10 lenders, including some “deep” lenders with higher discount fees, so when that real “D” credit customer walks-in, the dealership will be prepared to handle that customer.

A careful balance must be struck between assuring a wide range of non-prime lenders are available to the dealership’s non-prime customers without diluting the dealership’s per-lender loan volume. If the dealership is signed-up with too many lenders, its loan volume becomes so weak that it won’t be considered important to any particular lender. This, in turn, will negatively influence the entire funding process. In other words, the stronger the volume and dealings with the lender, the more successful the approval and funding process will be. Thus, the most prudent approach to special finance calls for keeping the lender relationships to an appropriate number. That number usually is determined by the contract volume and the credit mix of the prospective customers.

In order to determine which lenders are best able to serve your dealership’s special finance demographic, it is imperative to get to know each lender’s guidelines. The same is true of the rep’s and underwriter’s interpretations of those guidelines. Learn the lenders’ ways evaluate the application; sometimes it’s not what is written down that is most important.

However, lenders aren’t the only important element in the equation for special finance success. As an F&I manager, financial underwriters are your bread and butter. Cultivate and maintain a good relationship with them. Keep it honest and professional. If an underwriter discovers chronic inaccuracies in your deals, it will hamper your ability to do your job. Avoid the “shotgun approach” of sending the same deal to multiple lenders, and don’t play one lender against another in an effort to obtain approval for a single loan. While these methods may result in a particular deal’s successful close, the long-term damage it will do to the lender-dealer relationship far outweighs the benefit of that single deal. Look at the big picture, and count on working with your lending counterparts for a long time. For this to occur, it is imperative you treat each other with the utmost respect. Trust is of extreme importance.

Ultimately, the positive, professional relationship between the lender and the dealer makes everything happen.  If that relationship is characterized by unprofessional or disrespectful behavior, every deal that comes up will be plagued with difficulty. Take time to get to know the reps and the underwriters. Let them know they are very important to you. Having them consider you as a friend will immeasurably improve your relationship. While you may see a rep more frequently, don’t forget your relationship with the underwriter. Taking a personal interest in both is just pays more dividends.

Once your Special Finance Office has an established, consistent network of positive lender relationships, it is poised for success in the non-prime market.  Extending respectful, professional consideration to everyone on the lenders’ teams, from the underwriter through the rep, can have a dramatic impact on the overall success or failure of your Special Finance Office.  Lenders with a negative view of your dealership are more likely to look unfavorably upon your non-prime deals.  This can leave you unable to serve one of the most potentially profitable demographics in the automotive industry.