Your Daily Operations Magazine
Search Close Menu

Dealer Ops

Smart Dealers Find Profit In Special Finance

It’s no secret that many dealers shy away from Special Finance scenarios, preferring to “broom” credit challenged customers instead of going the extra mile to get the deal bought. Highly successful dealers know that turning their back on Special Finance is bad for business.
“The biggest attraction of Special Finance is its profitability,” says Jim Bass, chairman of the National Automotive Finance (NAF) Association, which represents the non-prime auto finance industry. “Gross profits per deal in excess of $3,000 are not unusual, while on new cars the front-end gross is often closer to $1,000.”

The workflow of a Special Finance deal differs fundamentally from a prime deal. The typical prime deal scenario focuses on the vehicle. Most of your time with the customer is spent discussing vehicle features and available options.

In Special Finance scenarios, the spotlight is on financing. Successful deals start by qualifying the customer’s financial situation with a few key questions. The next step is identifying cars on the lot the customer can afford.

Savvy dealers take advantage of profit management tools to match the customer’s maximum monthly payment with all available vehicles, increasing the chances of finding one the customer will want. Through systematic screening, the right software program can quickly show which vehicles match both the customer’s needs and the dealership’s profit goals. These systems should also integrate into the F&I office systems to avoid duplicate entry of information and reduce errors that can result in deals unwinding.

Look for systems that will enable sales managers and Special Finance managers to run different scenarios based on vehicle type, inventory age, dealer gross profit or other custom criteria. Book-out data for valuing the customer’s trade-in and the profit potential of the dealer’s inventory should also be integrated.

“People like to have a choice, so out of about a hundred cars in our used car inventory, ideally we can show them five or six,” says Paul Schmaeling, general manager of Burgunder Dodge of Bridgeville. Pa. With the Special Finance functionality software, it is easy for your dealership to see not only where you are from a gross-per-vehicle standpoint, but also to jump between deal structures to see how that profit changes.

Quick tips for starting a Special Finance Department

1. Choose a “yes” manager who has a combination of attributes like exceptional relationship skills and a never-say-die attitude. Both are needed to get difficult deals bought, while generating a strong referral and repeat-buyer base.

2. Invest in training, since Special Finance managers are hybrids of sales and finance managers. Also, the subject matter can be difficult to master, since non-prime programs can be more complicated than prime programs.

3. Develop a detailed checklist for the steps required with Special Finance contracts. This will keep financing sources happy, reduce contract delays and get deals funded faster.

4. Beef up your used vehicle inventory to ensure you can give customers a choice of cars for which they qualify. Focus on vehicles with sales prices below $12,000 so the car is affordable and provides adequate gross profits.

5. Invest in technology that allows you to exhaust your inventory and present customers with multiple options while analyzing the profitability of each deal.
 Vol 3, Issue 10


Remarketing by Element Joins NIADA Network

NIADA members stand to gain a number of benefits from the association’s new partnership with...

Remarketing by Element has joined the NIADA’s network of National Member Benefit partners and will offer prime lane placement, among other benefits, to the dealer association’s members.


Trump Wins China Auto Tariff Standoff

Vehicles exported to China from BMW’s Spartanburg, S.C., plant and other U.S. factories will no...

China has agreed to reduce import taxes on U.S.-built vehicles from 40% to 15% for the duration of a 90-day countdown to a new trade deal between the world’s two largest economies.


Used-Car Prices Fall 2.5% in November

Black Book reports prices for pre-owned compacts such as the Kia Forte fell by 3.3% in November,...

Black Book’s final depreciation report of 2018 finds prices for used cars and trucks decreased by 2.7% and 2.3%, respectively, with declines among compacts, minivans, and full-size utilities setting the pace.


Cox: Dealer Pessimism Grows With New Threats

Cox: Dealer Pessimism Grows With New Threats

Cox Automotive’s latest Dealer Sentiment Index finds a ‘notable negative turn’ among U.S. dealers, the majority of whom took a dim view of the fourth-quarter market and their 2019 prospects.

Dealer Job Finder

See more


Number of EVs to Double by 2021

U.S. electric-vehicle sales forecasted by the Edison Electric Institute would require the...

The number of electric vehicles on U.S. roads will double in the next three years, according to a new report from the Edison Electric Institute.