I guess my timing was right when I delivered “A Newbie’s Guide to F&I” in the February issue, because a reader asked me to follow up that article with a few words on lender relationships. Unfortunately, there isn’t enough room on this page to explain what I think is a critical topic for F&I managers. But let’s see what I can do.
So, have you ever wondered why the analyst who approved your deal calls back a few days later to check the status? The reason is he wants the paper, because most of them get paid a performance bonus on the volume they put on the books. Some analysts are also rated on their portfolio. That doesn’t mean they all follow up. Some buyers are just too lazy or don’t follow corporate mandates. Sometimes they’re simply happy with the business they have.
I recently had the joy of meeting one of my buyers. He drove up in a BMW 7-Series convertible. Not bad for a desk jockey, but can you imagine what his boss drives?
All joking aside, it’s critical you establish a strong relationship with your buyers, the type that stands the test of time. But tread carefully. Getting too cozy with some buyers (i.e., lenders) can spell T-R-O-U-B-L-E, because the moment they sense you are indentured to them, they want all of your deals. And some of them — not all — will occasionally get jealous if they don’t get them.
So, what does “rehash” mean? Well, let’s say you submit a deal to several lenders and get various conditional approvals. After determining which one presents the least amount of hoops to jump through, you start collecting everything you need to get the deal bought. But then you discover the terms of the approval can’t be met. That’s when you call the buyer to rehash the deal so everybody wins.
It may be that the income doesn’t match or proof of residency isn’t available. The callback may also indicate the open trade in their credit report must be traded so that the customer’s debt-to-income ratio falls in line with the source’s guidelines. While these are the most common stipulations that can stop a deal in its tracks, there are ways to put most any deal together.
But it will demand quick action on your part. Merely presenting the deal back to the buyer’s manager with unsatisfied conditions and without even trying to negotiate a better deal is just outright laziness in my book.
If we can’t get the deal worked out to a point where we can sit in front of them with a bona fide finance offer, the chances of selling F&I products are pretty darn low. I don’t know about you, but I’m all about product sales. As I’ve written before, reserve is simply a byproduct of the finance office. If all the customers who walked in your dealership were 800 credit score customers, your job would be a breeze. But we all know that’s a fantasy.
Out here in the trenches, we deal with a mixed bag of customers from all walks of life. That means no two deals are ever the same, so you need to be able to field a variety of credit profiles and situations. And that includes understanding the credit-buying habits of all of your lenders.
So, how does one go about that? Well, one of the easiest ways is to analyze how your finance sources have been looking at your deals by using Dealertrack and RouteOne’s lender report generator. It compiles all of the applications you received in a given period of time. They’ll be divided into straight-up approvals, deals approved conditionally and the declines. They also have the ability to track approvals by credit scores.
Armed with this information, you can then get a handle on a particular lender’s buying habits and how it relates to your batch of business. If you’re unfamiliar with these functions and need help, reach out to those companies. They’ll be glad to send you a tutorial to help you navigate and understand the functions I described.
The point is, you can’t manage what you can’t measure. And while it’s easy to sit back and complain about a lending source’s failure to meet your business needs, not attempting to fully understand what they want in terms of paper quality is less than professional. Hey, knowledge is power, but using that power to make an intelligent decision on the fly and expedite a customer through your process is the mark of a real pro.
Once you have a good working knowledge of your finance sources, then you can categorize them and know which ones to submit certain classes to. Will there be instances when you’re wrong? Sure, but that’s why you have more than one finance source.
Marv Eleazer is a finance manager at Langdale Ford in Valdosta, Ga. E-mail him at [email protected]