Do We Need A Special Finance Department?
In the average F&I office in the average dealership, the average finance manager deals with every spectrum of the credit rainbow. The variance in credit worthiness is reflected in the racks of deals awaiting approvals from the lenders. At what point does the conventional F&I manager become overwhelmed with the chase for documentation to secure a deal?
The answer depends on how a dealer responds to the following series of questions:
• Are the sales managers and sales personnel accountable for the documentation? Can the F&I manager direct the sales personnel to “follow the customer” in order to secure the documentation?
• What is the finance manager’s involvement with the used inventory? Can the F&I manager direct the sales personnel to a specific unit that will satisfy a lender’s guidelines?
• Do the sales managers pull credit bureaus? Who conducts the credit interviews? How does the dealership enforce its privacy policy in order to protect non-published customer information?
• What are the responsibilities of the finance manager when it comes to funding? Who prepares the lending package – the office staff or the F&I manager?
In a dealership where the sales manager controls the deal, the sales manager is clearly in command – pulling the credit bureaus, working a four square, using a lender book and accessing dealer track. In this scenario, the sales manager structures the deal, and the F&I manager works in concert with the sales manager to secure the funding.
The F&I manager usually tracks the deal through funding, although they may have a secretary or office contract assistant who actually pulls apart the deals and prepares the funding package. Changes to the vehicle or the deal are directed through the sales manager. The finance manager cannot change the sales price nor the vehicle sold without the sales manager’s written authorization.
F&I managers can handle about 65-75 deals per month, although as they scramble to rewrite many of these deals, chase documentation, and work multiple lenders on each deal, it often feels more like 150! Before making a decision to separate special finance from conventional F&I, a dealer and general manager should know what the average credit score is for their typical store traffic. Are they advertising specifically for credit challenged customers, or are they simply seeking financing for their current customer base?
If a dealer is aggressively soliciting business from the not-so-prime-time credit customer, it may be important to establish a separate special finance department as well as a separate location with a separate inventory.
Customers who have experienced some credit difficulties usually have scores in the 600’s. While not exactly “A” credit, these customers do not fall within the buy here/pay here category either. These people do not want to be associated with a store that specializes in “bad credit”. Nor do they want anyone they know to see them in a dealership that caters to customers with credit problems.
A dealer’s mandate is to place every customer in a face-saving environment. Temporary credit difficulties do not equate to permanent bad credit ratings. The key is to create a dealership structure that will maximize sales and foster repeat business and referrals.
The winner of the great debate about special and conventional finance is the dealer who knows the most about the type of business he has and the dealer who best understands the kind of business he wants to build.
World of Special Finance, August 2003, p. 6