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Fighting for the Fifth "C"

May 2008, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

Have we as an industry forgotten about the fifth component of the lending Cs? You know, character. It’d be a shame if F&I managers lost the ability to call up a buyer or lender rep to fight for their customer. Isn’t that what made this industry fun?

Hey, don’t get me wrong, I’m fully aware of the scoreboard. I know transparency is the name of the game these days, and I understand that finance companies are working hard to rebuild confidence on Wall Street.

Heck, there’s a guy on our forum who’s collecting those dear-john letters finance companies have been sending dealers of late. You know, the ones that say the current credit situation is forcing the lender to cut back on originations, which means cutting back on dealers.

There were even some forum members comparing caps lenders are putting on how low they’re willing to buy. One wouldn’t go lower than a 540 FICO, the other said 560.

One of my sources even told me how one European manufacturer told its dealers that those customers with 800 FICO scores aren’t going to get a free pass like they used to.

Another source told me about how conditions are being placed on line-one add-ons. Bottom line, he said, forget getting those 150-percent and 200-percent loan-to-value ratios we were getting nine months ago.

The most sobering tale I’ve heard is about the increasing number of consumers walking into dealerships to hand over their keys. One stat had repossession up 15 percent nationwide in February.

Another source of mine calls me anytime there’s something positive to report, such as when Fitch Ratings reported that February U.S. auto asset-backed securities’ performance exhibited a slight improvement. She called me again the day AmeriCredit reported month-to-month improvement in its February credit data.

I understand today’s finance deals need to be bulletproof, but I still think we as an industry need to maintain some of that human element. Heck, F&I managers aren’t the only ones who want to see lenders keep that fifth “C.”

“Those things really piss me off,” said Danny Reyes about those pesky automated systems some lenders are employing. “When I look at a deal, I look for stableness, willingness, commitment and down payment. And I also look at what car is being purchased. How is the computer going to know the difference between a finance-appropriate car and one that’s not? And how is that computer going to know if a person has a bankruptcy that was discharged? It’s not.”

Reyes is an assistant branch manager with a subprime auto lender in
Florida. He’s the anonymous guy I wrote about in my March editorial, who provided a couple of tips on how F&I managers can rehash a deal. Well, I finally hunted him down.


Reyes’ hatred for the automated systems is understandable. He views them as a threat to what he does, but he also doesn’t think those systems really evaluate customers. That’s why, he said, dealers should never take “no” for an answer.

“There’s got to be someone who can override the system,” he said. “The moment you get a decision, you got to work that buyer.”

And that’s what one F&I manager was looking for when he called Reyes during our conversation. The guy wasn’t trying to override one of those automated systems. What he wanted was a direct relationship with Reyes rather than go through those ever-popular lending platforms.

“I kind of like speaking to people live,” Reyes said. “The way I work is if the customer has a good payment history, great. I’ll start them at 90-percent LTV. If they’ve had a repossession in the last year, I’ll start them at 50 percent. I’ll give you a way to go.”

In fact, that’s what another F&I manager was looking for when Reyes’ phone rang. Apparently, she wasn’t getting any responses from her other finance companies, and called Reyes to see if he could work with her.

Still, Reyes understands the need for those systems, as he’ll even admit that car dealers don’t always operate on the up and up.

“There are a lot of book-outs where I get one picture of a car, but the agreement will have all these add-on accessories,” he said. “The picture, however, won’t show any of that. And that’s a big no-no with me.”

“So, how do you get around those systems?” I asked Reyes. He said dealers simply need to know what they’re dealing with. To do that, they need to find out from their rep what underwriting criteria is for the automated system. The trick, he added, is to get the deal approved and go from there.

“If the customer is truly on a 2007 Honda Accord, submit the deal on a 2007 Ford Taurus just for approval purposes,” he said. “Then get on the phone with the buyer and rehash from there. In essence, you’re tricking the system. You may have to play with the variables, such as income and time on the job, but keep in mind that at the end you need to be truthful and honest. If you don’t play your cards right, all you’ll be doing is spinning your wheels.”

And what if that doesn’t work?


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