Special finance is an art. To properly capitalize on the growing SF market, a dealer needs to have several different aspects of his business in order, including having the right person in charge of the special finance department. Having the wrong person in charge can cause everyone problems, which is a lesson Sharpnack Chevrolet Buick in Willard, Ohio, learned the hard way. Fortunately, the dealership now has the right person in charge—Mike Mandato, special finance manager.

Mandato, who’s been at the dealership for about six years now, explained, “They had somebody here [before me] that came in and talked a big game, and they hired him to do [SF]. He was here probably four or five months, from what I understand. He delivered probably 20 cars, and they had to go pick up about 15 of them because he couldn’t get them funded.”

Since the dealership had been burned once, management was hesitant to get back into the business, but Mandato had prior experience at a smaller independent dealership and knew firsthand how profitable special finance could be. In fact, the reason he wanted to work for a larger franchise dealership like Sharpnack was because there was more opportunity there. Eventually, his persistence paid off and he convinced the dealership to give it another try. General Manager Jeff Neibler said, “He actually hounded us for probably six months before we decided we wanted to do [SF] … We were very reluctant.”

Sharpnack Chevrolet Buick
Despite being burned on their first attempt at special finance, Sharpnack Chevrolet Buick in Willard, Ohio, eventually tried again with a new special finance manager, Mike Mondato. The dealership has steadily increased its special finance sales over the past six years, even through the recession, and Mondato's long-term goal is to reach 80 special finance sales per month.

The sales staff was skeptical too. Mandato said all the salesmen were against SF and gave him a hard time at first. He explained that the salespeople were discouraged by their past experiences because “they’d spend an hour or two with [a customer], and they wouldn’t qualify them properly. The salespeople would realize they were dealing with special finance customers … [and] couldn’t get them approved anywhere and felt like they were wasting two or three hours of their life.” When you factor in the commissions the salespeople lost when the first SF manager came in and had several deals unwind, it’s easy to see why they were hesitant.

Obviously, Mandato had to prove his abilities in SF before he could get buy-in from everyone in the store. He said, “The first five or six [SF deals], I actually had to convince the customers to leave the cars here to get the deal funded … because [dealership management was] too worried about chasing cars down. They wanted to make sure [the deals were legitimate]. So it was kind of rough in the beginning … but we haven’t lost one vehicle since I’ve been here.” The salespeople are on board as well. “Now, they’re fighting over who’s taking the customer.”

Initially, Mandato was a one-man special finance department, working deals cradle-to-grave. “That got old because I was here from 8 o’clock in the morning to 10 or 11 o’clock at night … It took about 10 months. Then they hired me an assistant, and the assistant started showing a lot of the cars.” The department evolved further when the dealership implemented a business development center to handle the special finance leads Mandato was once responsible for (in addition to all his other duties). “We’ve just grown [the SF department] from there,” he said.

Leads – the majority of which are purchased – have always played a factor in Sharpnack Chevrolet Buick’s SF success, since the store is in a small town. “We’re in a town that only has a population of 6,000 people, and I would say probably 70 percent of those people have good credit … so most of our business comes from cities around us. Our average [SF] customer is driving 25 to 30 miles to buy a car,” said Mandato.

Over time, he also worked with salespeople to properly handle special finance customers. Since the vast majority of special finance customers come in with an appointment, they’ve been instructed to ask for Mandato or the business development representative, which lets salespeople know in advance the customer has subprime credit. Then, a salesperson sits down with the customer, goes over the checklist of required documents customers are told to bring, and tries to determine what kind of vehicle fits each customer’s needs. Neibler said, “Then we back into the deal from there … [based on] whatever they qualify for with the amount of down payment they have.”

Mike Mondato"We're in a town that only has a population of 6,000 people, and I would say probably 70 percent of those people have good credit ... so most of our business comes from cities around us. Our average [SF] customer is driving 25 to 30 miles to buy a car."

- Mike Mondato, Special Finance Manager

The store regularly works with 10 special finance companies, four of which get most of the dealership’s business. “There are specialty situations … sometimes we’ll send a deal to a bank we don’t use a whole lot just because they do something special,” explained Mandato. “One of the keys to special finance is knowing [which finance companies] do what and having good relationships with them.” He calls all the special finance company representatives he deals with, even the ones he hasn’t sent deals to recently, to “talk to them and let them know where I’m at, what I’m doing, why I haven’t sent them any business.” He said, “That way, when I do need them to step up for me, they’re still there for me … They all know where they fill the gap for me.”

He said he regularly works with customers who’ve been to several other dealerships that couldn’t secure financing for them. He typically discovers the dealerships were submitting customers’ information to several finance companies without understanding the companies’ programs. He said dealerships need SF managers who are familiar with finance company programs in order to properly pair customers and companies. Too often he sees a customer with “a $1,300 [monthly] income, and these dealers are sending them to [finance companies] that don’t even do that low of income.”

Understanding finance companies’ programs also means having the right vehicles to match those programs, which the dealership handles well. Many dealers struggle with pricing SF vehicles online because online, it’s a price war, and those low prices typically don’t work well for proper special finance deal structure (at least if the dealership intends on making any money off those deals). Neibler explained, “We keep a supply of used cars [for SF] that are on the Internet, and none of them are priced.” The dealership’s current average profit per SF deal is about $1,600 a car.

To stock the lot with cars for SF customers, the dealership relies heavily on trades. Neibler said, “We sell all of our new vehicles … at factory invoice, and we don’t fluctuate from that. Even if it’s a new hot product like the Cruze or Equinox, we still sell [them at invoice] so we can get the trade. … Even if it’s a late-model trade, we’ll trade on that car. It might take two generations of trades, but eventually we’re going to get that subprime car on trade.” He estimated that 75 percent of the dealership’s SF sales are on vehicles that were trades.

Over the past six years, Sharpnack Chevrolet Buick has honed its special finance processes, and sales have continually increased, even though the recession. The dealership sold 40 in August 2011, and Mandato’s short-term goal is to get to 50 per month. Long-term, he believes the dealership has the potential to do up to 80 special finance deals per month.

Vol. 8, Issue 11