12 Steps to F&I Succe$$ – Step VIII Funding
A deal is only as good as the ability to secure the funding. When loan packages reach lenders after the approval period has expired or arrive with missing documentation, the dealership loses cash flow and sometimes even the loan approval!
Lenders enter into dealership agreements on good faith, relying on the dealership to accurately represent the customer, the deal structure, and the vehicle.
The best way to insure that your deals are funded is to use the lender’s guidelines, get the details right the first time, and follow the documents all the way to the deposit into the dealership’s bank account.
Credit the Source
Lenders can access all three major credit bureaus. They will run the bureau that is most prevalent in the customer’s area. For example, a lender will most likely pull a Transunion bureau for a Texas customer, while the same lender may pull an Experian credit bureau for a customer residing on the West Coast. When the finance representative looks at the same bureau information, it not only makes the credit interview easier, it also prepares the representative to answer the lender’s questions about the customer’s past credit difficulties.
I am frequently asked if the dealership has the right to show the customer the credit bureau. My answer is no. The practice of showing the credit bureau violates the dealership’s subscriber agreement with the credit bureau, which stipulates the dealership has the right to share only the information the dealership can enter into the credit bureau system: name, address, and social security number. You will be wise to verify your subscriber agreement(s) with your dealership’s legal counsel.
Give Credit Where Credit is Due
The best way to begin a credit interview is to put your customer in a non-confrontational environment. Introduce yourself as the one in the dealership who works with lenders to secure loan approvals. Ask for permission to discuss past credit items. Then you can safely say, “During my preliminary credit review, I noticed some credit difficulties (or glitches, hiccups, challenges – choose the word you think your customer will be most comfortable with). What happened during this time period?” Take notes, but do not show the credit bureau to the customer.
When you review credit information with the customer, ask for a recent pay stub to verify stated employment income. When the credit FICO score is low, lenders almost always want verification of income.
Verify the length of residency. Have they been in the house for two or more years? What was their previous address?
Are references listed on the credit application? A lender wants to know where the customer may go when times are tough. Where can the lender find the vehicle?
Document the Deal
The lender’s guidelines are the F&I department’s best friend. A deal properly structured will get approved much faster than one that seeks an exception to the guidelines.
Use a loan document checklist, and check it twice. Documentation is the key to securing rapid funding. Most lenders will provide a list for you.
Pull the deal apart and separate the loan documentation from the accounting office package. Make it easy for the accounting office to pull the funding package to verify the invoice and add on items to obtain the loan assignment.
Track the loan package. Whether it goes UPS, FedEx, Airborne, messenger, U.S. mail or by e-contract, the funding will most likely return the same way you sent the loan package. Perhaps your dealership can simply fax loan documents to the lender, followed by automatic deposit funding. Regardless of the delivery method, you must track the loan documents to their destination and the funding into the dealership.
Make it a Happy Ending Again, a deal is only as good as the ability to secure the funding. And secured funding is verifiable; our subject in Part 9.
F&I Management & Technology Magazine, Nov/Dec 2004, p.48 & 50