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Saving a Lost Art

May 2009, F&I and Showroom - Feature

by Randy Hoffman

Some industry experts put the blame on technology. Others lay the blame on the reliance of scoring systems by lenders. Regardless of where the blame should be placed, it’s clear the “art of hanging paper” is a lost art.

It was just a few short years ago that lending institutions had representatives visiting our dealerships on a regular basis, competing and sometimes begging for our business. Now, under the weight of the current economic climate, lenders are trimming staff and placing a much greater emphasis on collections and managing defaults.

Even worse, some lenders have eliminated those monthly visits altogether in favor of monthly phone calls. Some well-known institutions have even gotten out of the business entirely.

Dealers are also now being conditioned to take the first offer from the bank, without any rehash or ability to get the deal done. Banks are getting indignant about the bureau scores appearing on the customer applications we submit. In addition, the credit crunch has given the lending institutions the strength to pull back, which is something they’ve tried unsuccessfully to do in the past. This is where the artistry of hanging paper is missed.

An Industry Without Credit Scores

Several years ago, before bureau scores were published, F&I managers had to learn how to read a bureau. Doing so would lead into the customer interview, a crucial step before the advent of menu selling. The goal of the interview was for the F&I manager to get a good understanding of the customer’s credit, character, capacity and collateral, sometimes referred to as the four Cs of credit.

F&I managers then created a plan on how to sell the paper to the bank. Remember, most bankers or credit analysts did not consider themselves as being in the car business. Like today, banks didn’t always agree with the deals we presented. The only difference back then was there weren’t scoring systems for them to rely on.

Most lenders had their own proprietary scoring system, which very few people understood, including the lenders’ own credit analysts. It was not uncommon to have an analyst declare that he or she couldn’t figure out why a deal was scored the way it was, or state that the bank must have secretly changed the algorithms the night before. In either case, it was up to the F&I manager to start doing his or her job.

When beacon, FICO or bureau scores were introduced, lenders turned to them to guide their decisions. Those arbitrary numbers were supposed to make life easier for both the banks and the dealers, as they were supposed to provide guidance on what deal should be bought and at what price.


  1. 1. Danny Southworth [ May 26, 2009 @ 12:27PM ]

    Good article that you wrote. I've been an F&I Director for 24 yrs and what you said is true.

    I beleive that true paper hanging as you and I both know has not totally dissapered.

    It's still there and if these young guns out there would learn how to hang paper, not to take no for an answer and work the lenders for a better terms, they could get more vehicles OTC and make more $$

  2. 2. Steve Crow [ June 03, 2009 @ 06:10AM ]

    The constant use of the term "hanging paper" indicates a wish to return to the good ol days of failed F&I practices. It reminds me of slick haired, gold chain wearing F&I Managers who spent too much time "in the box."

  3. 3. Kenneth Rishel [ June 07, 2009 @ 12:38PM ]

    Excellent article. I take exception to Steve Crow's comments. . While I never wore a gold chain or slick hair, I might have spent "too much time in the Box" given the 6 day - 14 hour schedule. My numbers were three times what I understand to be today's acceptable averages, and I handled 80 new and 120 used a month all by myself using a DOS based program on a IBM that had less functions than my mobile telephone.

    Compliance is important, and today's computers offer a world of opportunities, but basics are still basics.

  4. 4. Cynthia [ June 09, 2009 @ 12:46PM ]

    Very good article. I have been in the industry as both a sales manager and an F&I for the past 16 years and originally as a credit manager. As a credit manager in the bank i did not have to rely on a score...i was actually empowered to make a decision relying on facts. When I switched to F&I i did the same thing and of course glory came. Now a days we can no longer do that because the current credit analyst at the banks do not have the expertise to actually make a sound credit decision without their computers. How can we rehash a deal with the bank when the analyst is telling us: "the copmputer is telling me to reject?" We do in fact need to have better trained F&I's but we also have to have better trained analyst to actually do the analytical part of the deal and only use the computer as a point of reference. I am sure then we could get more OTC and make much more money and get the show running again.

  5. 5. THOMAS [ June 11, 2009 @ 07:29AM ]

    Having been in F&I since 1990 I would concur that "hanging paper" has sadly become a lost art. When most lending institutions do not allow rehashing i don't see how honing one's skills would be beneficial. It's gotten to the point that an 8 dollar clerk can punch deals into Dealer track and await the response(mostly negative these days) A turn down is a turn down these days, a very black and white environment with little gray area. Everything is score driven for the most part (unless you want to put up with Chase Custom's nonscence)


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