Greg Goebel is the CEO of Used Car University LLC.

Greg Goebel is the CEO of Used Car University LLC.

Is your special finance process punishing salespeople for sticking with the plan? The special finance guru says having the right compensation plan is the only way to right the ship.

Setting up a process to handle subprime customers is no easy task. It takes a serious commitment, and that commitment starts with the dealer and extends all the way through the store. But not even commitment will be enough for the long haul.

Commitment to the process tends to wane due to two main causes: The first is a growing stack of contracts in transit, an issue I tackled in last month’s issue. The second is a compensation plan that creates winners and losers among the staff.

More often than not, the “loser” is an experienced salesperson or F&I manager who is being underpaid for working subprime deals. That discourages the sales team from sending customers to the special finance desk, causing the finance office to try to wedge them into a prime structure.

I am loath to tell dealers to change their compensation plans. I know how precious those plans are to their staff and how demoralizing it can be to suddenly be asked to play by a new set of rules. That’s why it’s so important to have the right one in place to begin with. But if the existing plan is unworkable, you must be willing to change it. With that said, let’s take a look at four potential sources of conflict between prime and subprime:

1. PLAYING THE NUMBERS GAME Many dealers who are new to subprime will decree that any customer with a “low” credit score must be sent to the special finance manager. This ap- proach is problematic for several reasons.

First, where exactly do you draw the line? There’s no magic number that divides prime from subprime. A Chevrolet dealer might say any score below 450 is special finance. The Jaguar dealer next door might put the cutoff at 700. 

Second, even if there was a clear dividing line, it wouldn’t help you decide how to work the deal. Credit scores don’t get deals bought; it’s all the other factors that make up each customer’s profile that determine their credit worthiness. Finally, if the prime finance manager thinks he can get the deal bought, he’s going to work it to death. He will pull multiple bureaus to find the highest score. He won’t structure it properly, and he will push the funder’s patience to the breaking point. A week later, he’ll be no closer to getting the deal done. And that’s not necessarily his fault. Read on to see what I mean. 

2. RIGHT MANAGER, WRONG DEPARTMENT Another common mistake is to take a talented F&I manager — and his or her compensation plan - and put him or her in charge of special finance. Of course, the producer’s performance was judged based on profit per retail unit (PRU), which depends upon penetration rates for back-end products such as extended warranties and service contracts, credit life and GAP.

Putting solid F&I producers in charge of special finance means they’ll be working with Tier 3 and 4 finance companies that are not in the business of leaving room for F&I products. So, how on earth do you expect your finance manager to maintain a high PRU when there are no funds available for protection products?

The solution is to pay special finance producers out of the front-end profit on each sold deal. But then you run the risk of doing what I’d like to discuss next.

3. CUTTING OUT THE SALES TEAM It’s so vitally important to be able to identify special finance customers as early as possible. The trick is to train your salespeople to ask customers qualifying questions so they are sent to the appropriate desk.

To compensate for wages lost on the back end, you give your special finance manager a share of the front- end profit. Specifically, you give them half of the salesperson’s share. That’s the same salesperson who sent the customer to the special finance manager and is now being punished for it. And he’s not alone, as you’ll read next.

4. LEAVING THE CUSTOMER HANGING You can’t expect subprime customers to get a prime deal, but there are a few exceptions. FM Financial for instance, offers a subvented program for new Malibus. Well, try to put that Malibu customer into a new Silvera- do. No chance, right?

That doesn’t mean the F&I manager won’t try. But after a week of making the funder’s life difficult, there’s no deal and no new truck. And good luck trying to switch the customer to the used vehicle you should have been selling from the start.

Remember, your CSI score is based on surveys returned by customers who were actually delivered. It doesn’t account for those who walked away frustrated. 

It would be a shame if that scenario I painted is playing out at your store, especially since you got into the special finance business to serve those hard-to-finance customers. You invested in training, rebuilt your inventory and opened up your finance company spread, only to see the whole enterprise undermined by a poorly constructed compensation plan.


First things first, you cannot let your people suffer for following the special finance process you constructed for them. Remember, your salespeople would rather have 100 percent of a prime deal than half of a subprime deal, and rightfully so. So don’t punish them for sending customers to special finance. 

And if you’re asking your prime finance manager to work subprime deals, make it clear at the outset that you appreciate the extra effort and you will compensate them accordingly. If their income is based on PRU, don’t let a shortage of back-end funds hurt their average. Let’s say your F&I manager’s target is $1,200 per vehicle. Let’s also say that in one month he or she gets 10 deals funded by a subprime finance company that offers a maximum of $515 on the back end. Your producer could sell a service contract on every single deal — a remarkable accomplishment — and still find them- selves $685 below target. 

The solution is to identify the finance companies that limit the back end and pay a flat commission on those deals, and to not include them when you’re calculating PRU and penetration rates.

When a dealer asks me to set up a sepcial finance operation at his or her store, I get started weeks in advance. I send a questionnaire that asks them everything but their underwear size. It sometimes takes two weeks to complete.

There’s a method to my madness. I have to know everything about their sales and finance processes — and their compensation plans — to be sure we can achieve complete buy-in from everyone who will be affected by the new operation. 

Investing in special finance can take your dealer- ship to the next level, but it takes commitment to do it right. Don’t sabotage your efforts by failing to address the effect those subprime deals will have on your employees’ paychecks.

Until next month, great selling!

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Greg Goebel

Greg Goebel


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