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Mad Marv

Be the Buyer

Last month, it was the dreaded ‘Line 5’ call. Now, our in-the-trenches columnist ponders the dynamics of rehashing deals and enhancing back-end approvals.

September 6, 2011

Nothing irritates me more than a lender that won’t bend its guidelines when an exception is needed to deliver a vehicle. Even more irritating is when a customer wants a back-end product and the lender won’t budge.

Over the years, I have taken my frustration out on more than a few reps and lender buyers over this issue. I’ve thrown their contracts in the dumpster, cursed them on the phone and banished them from my store. It’s true; my pride has gotten the best of me over the years. In fact, I’m amazed I haven’t completely alienated some of the people I’ve taken to task. Then again, the cool name the editor gave my column wouldn’t work as well if I had been any other way.

So, why did I behave so badly? Well, I was trained to believe that strong-arming lenders was the only way to get what I wanted. I guess I felt that the louder and more obnoxious I was, the faster buyers would give me what I wanted — even if it was just to get me off the phone.

The truth is that my ranting and raving only showed that I failed to understand my lender’s business model. So, let’s make sure that doesn’t happen to you.

Guidelines vs. Rules: Let’s be clear, guidelines aren’t the same as rules. It’s imperative that you know the difference before I explain what each term means to an F&I manager.

See, guidelines are stated points a lender believes — based on its internal analysis — must be reached for a loan to achieve its intended profit yields. Guidelines typically cover loan term, book value limitations, back-end product allowances and monthly payment caps, among others. They can be stretched, bent and even trumped.

Rules, on the other hand, are non-negotiable. No amount of shouting will change them. We’re talking about hard-and-fast loan limits, such as vehicle age and type, miles, minimum amount financed, back-end product price caps or minimum income requirements.

The reason guidelines and rules exist is so the lender can expect a reasonable return on its investment while maintaining good loan performance. There’s no way a lender can remain in business if it caved to every demand, so don’t expect exceptions on every deal.

Back-End Exceptions: Every lender has varying tolerance levels, so make it your business to know each lender individually. And as I wrote last month, you must pick your battles when asking for back-end exceptions. They should be used wisely and
prudently.

You also have to remember that, even within a lending institution, opinions on the business vary. And that’s why supervisors are important. If you truly believe you have a viable deal and the buyer isn’t budging, give his or her boss a call. It could save the deal.

Rehashing a Callback: When rehashing, it’s critical that you return to the table with something you didn’t have before, such as more cash down or a vehicle that’s a better fit with the lender’s program. Remember, we can’t assemble an F&I presentation until the lender and dealer have agreed to an acceptable deal structure, so it’s vitally important you learn the various lender guidelines.

The key is to be sensible and approach the buyer with good reasons why they should buy the deal. That’s why I’ve created the following six keys to rehashing a deal:

• Be familiar with the lender’s guidelines and rules before calling to rehash.

• Be familiar with the customer’s situation.

• Be sure there isn’t any more cash or trade equity.

• Be sure the customer’s monthly debt-to-income ratio is within the lender’s guidelines.

• Be sure there is no co-signer.

• Be sure there isn’t any more income.

The truth is, sometimes a simple request is all it takes. Captives like Ford Motor Credit rely heavily on payment, so you can often get an increased payment call from them simply by asking for it. The lesson there is, never take the lender’s initial callback as gospel. Pick up the phone and ask!

Look, whether you think so or not, your buyers aren’t looking for every reason to turn down your deals. In fact, it’s quite the opposite. They have quotas to meet, too, so give them every reason to believe your deal is a buyable one.

Marv Eleazer is the finance manager at Langdale Ford in Valdosta, Ga. E-mail him at marv.eleazer@bobit.com.

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Author Bio

Marv Eleazer

Finance Director

Marv is no insider. He’s an actual F&I manager with more than 20 years of experience. Get his from-the-trenches take on the industry every month at fi-magazine.com.

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