Tricks of the Trade

So I stirred up a little controversy on the forum recently. I posted a solicitation for strategies to entice lenders to buy a deal. My inquiry was spurred by a recent conversation with a veteran F&I director. She shared with me a strategy taught to her when she started in the business years ago. Basically, her mentors instructed her not to divulge to the lender the full amount a customer was willing to put down. Instead, she was told to give the buyer a lower amount, then reveal the higher amount when he or she balked at the deal.

Her point was that a lot of the old tricks are lost on the new generation of F&I managers, echoing a sentiment I’ve heard before. So I thought a collection of some of those old strategies would make for an interesting article. Forum members, however, weren’t so enthused.

One member said the example I gave wasn’t a strategy at all. To him, it sounded more like a deal that was properly structured. “Most experienced buyers have heard all the lines before,” he wrote. “What I mean is, this is now a relationship business.”

Marv Eleazer, a F&I pro from Georgia, disagreed, saying that good rapport did little for him when a lender approved a deal from a competing dealership despite turning down the exact same deal he submitted days earlier. He said the best thing an F&I manager can do is to get the lender to provide a starting point to make a deal work.

Another forum member placed the blame on desk managers for not knowing the meaning of a properly structured deal, while others wondered if such a thing exists. One member said he attempts to plant seeds in the customer’s mind as to which direction the bank will go.

Jason Felton, another forum member, said the ability to get deals funded isn’t based on some magical phrase. Rather, he added, it comes down to how each lender prefers to work through a deal.

“I have bank reps who work better when I play dumb on deals and let them walk me through it,” Felton wrote. “Others want me to negotiate on rate, term and acquisition fees. I even have one buyer who wants me to call him because he doesn’t like working via fax or e-mail. It’s a matter of how you say it and who your audience is.”

The first lending rep to jump into the conversation was Danny Reyes, an assistant branch manager for a Florida-based subprime finance source. He confirmed that rapport does go a long way. He added that the best time to rehash a deal is in the morning, not at the end of the day. He also advised F&I managers to ask why the lender doesn’t like a deal — Is it the customer? The car? Would the lender prefer to be in an equity position?

Robert Boucher, a senior lending executive for a credit union in Stratford, Conn., said he wants to hear everything the F&I manager discovered about the customer during the interview. He also warned against calling on every deal or begging for approvals. Most of all, he’d like for dealers to respect the fact that there are times when he just can’t bend on his guidelines. And if he does, don’t go stuffing the deal with F&I products. Oh, and promising to send four or five good deals if he’ll let one slide just won’t work.

“A bad deal is a bad deal,” Boucher wrote. “Since I lose an average of over $6,000 on each repo, you would have to send me dozens of good deals for me to break even.”

That’s when a prime buyer jumped in with this advice: “Have any of you ever called your lender to say, ‘Don’t but this deal, I don’t trust the customer?’ Now that’s a relationship.” He added that F&I was spoiled the last five years, with banks buying anything that walked. The reason was because finance sources never cared how good the paper was because they’d sell those loan portfolios before they’d go bad. That’s not happening anymore, he said.

And for those dealers wondering why they can get “D” paper bought versus “C” paper, he said it’s because many of those Cs are still on the downward slide while the Ds have already hit rock bottom.

“Indirect lending today is about business and making money, not loan volume,” he wrote. “‘Find a way to make a deal’ is now, ‘Find a way to make a good deal, not every deal.’”

The take away here is there are no tricks to getting a lender to bite. In fact, the only way to give your customer a fighting chance is to know your lender’s programs, including their preferences for debt-to-ratio, credit bureau and pricing guide.