Tax refund season is Christmas in February for special finance departments, especially when credit is flowing freely. But if you haven’t prepped your team for the last few months, your operation could stand to lose the opportunity for incremental sales and gross profits to your competitor down the street. If that’s the case, the following is a quick primer for getting your team ready to cash in on tax season.

The first step you can take if you haven’t prepared is to determine the credit demographics of your dealership. It is important to determine not only the percentage of your total dealership sales opportunities that have subprime credit, but the percentage of customers who fall into what I call the various special finance credit tiers and niches.


According to a number of published reports from Experian Automotive, the average credit score in 2012 for consumers who financed a used vehicle was 659 (dropping four points) through the first six months of the year. The Federal Deposit Insurance Corp. (FDIC) generally considers anything below a score of 720 to be nonprime, while the National Credit Union Association (NCUA) draws the line at 680. Subprime is generally defined as credit scores falling below 640, so that means that the average person financing a used vehicle has nonprime credit and is closer to subprime than prime.

Additionally, the average amount financed during the first half of last year was $17,050, while the average monthly payment was $441. Those are important numbers to consider, as the more credit scores drop, the more interest rates rise, loan terms shorten and monthly payment drop.

So, if you have a high percentage of subprime credit sales opportunities, and a significant percentage of your subprime credit customers fall into the lower tiers as I define them (Tier 3, nationally 475–539 or Tier 4, nationally 100–474), then you absolutely must have finance companies on board that will finance these customers and the vehicles they’ll select from your inventory.

For a typical domestic franchised dealer, an average of 55 percent or more of their credit bureau pulls will be subprime. Sometimes this figure reaches 65 to 70 percent. When looking at the breakdown of these subprime credit customers, usually 60 percent will fall into the Tier 3 and Tier 4 categories. The biggest inhibitor of special finance operations — even those that excel in subprime credit — is the lack of finance companies and inventory for Tiers 3 and 4.


I recently did in-dealership consulting for a dealer who excels in opportunities consisted of these tiers. Can you imagine what I see in stores not versed in subprime? While having appropriate inventory is essential to being able to deliver properly structured deals, you must sign up with a full arsenal of special finance companies and familiarize your staff with them in order to take full advantage of the lower credit tiers and niches.

Most dealers, even those not actively engaged in special finance, have what I call the “Big Five” in their lender mix: Ally Financial, Capital One, Chase Custom, GM Financial/Americredit and Santander. Wells Fargo is also commonly found, but can be restrictive on relationships. Combined, these lenders comprise most of the volume in the marketplace, and are the choices such as Open Chapter 7 bankruptcies or the military market. So, you really need to look elsewhere to fill the void.

Certainly, some markets have some very strong local or regional players (Lobel Financial in California, or Turner Acceptance in Chicago), but for the most part, you need to look to national players like Auto Credit Acceptance, CPS, Exeter, Regional Acceptance, United Auto Credit, Westlake Financial and even Credit Acceptance Corp.

If you wish to play in the Open Chapter 7 niche, you must have companies like CPS, Friendly Finance (regional source in the Eastern region), Prestige Financial or Tidewater.

Simply having these companies on board — along with the proper inventory to pair with to suit up. Ultimately, you must have all of what I call the “Ten Critical Components to Success in Special Finance” in place to excel. If you missed them, I wrote about each in detail every month last year. So, check online at www.

Whether you are just now getting your game plan together for the 2013 tax refund season, or you have been planning it for months, the steps I have outlined above should help. With the capital available for auto finance companies to lend, credit flowing freely, and consumers having money for down payments, the first quarter promises to be a big one in special finance. Don’t miss the season, or you won’t be so merry!

Until next month, great selling!

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Greg Goebel

Greg Goebel


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