The essentials needed for success of the Special Finance department include attracting potential customers, the approval and the delivery. The area of funding, however, can quickly become the Achilles heal of the entire effort.
A mass of delivered but unfunded contracts will cause pressure and stress for the Special Finance manager. Similarly, the deterioration of a dealer’s liquidity will quickly lead to the erosion of a dealer’s commitment to the Special Finance effort (and often job insecurity for the Special Finance manager).
It seems rather simple—get the approval, collect the required documents, then package them together and send them off to the lender. Why then does funding become so difficult? To answer this question, we must understand the culture—both the culture of the dealership and the culture of the customer.
Looking at the customer, their goal is to obtain financing, and thus be able to purchase a vehicle. The customer is very cooperative with the dealership’s requests for information—until the moment they drive off the lot with their new vehicle. Try to get customers back to the dealership with documents necessary to fund deals. Their urgency to comply seems to disappear as fast as their taillights do in the distance.
Within the dealership, the culture must revolve around the attitude, “Time is of the essence.” Yes, that is the common theme of so many aspects of the auto industry, but here it is of paramount importance.
Two successful dealerships, both with very good Special Finance operations, both struggling with funding, what’s the common thread?
The common thread was the feeling that given a day or two, the problems would resolve themselves. In one store, there were unfunded deals 100 days old. On the surface that would seem outrageous, but believe it or not, many dealers seem to have a skeleton or two like that hanging in their closet.
To speed up funding, we start with the dealer principal. The dealer sets the attitude and commitment level of “seven days until funding.” Funding is money in the bank. Many dealers use timelines such as:
1) Sales personnel have 72 hours from delivery to collect all documents; 2) SF/Finance managers have five days from delivery to acquire an approval; and 3) somewhere from seven to 10 days from delivery to have received a funding notice or check. This attitude and timetable must travel all the way down to the sales person on the floor.
With these timelines in place, personnel are more focused. Should a deal be kicked back from a lender, then the approval timeline comes into play and a second approval should be secured within 48 hours, or the deal should be rescinded. Exceptions should only be made in writing by upper management or the dealer principal.
The next step is to create a funding checklist or packet that allows all dealership personnel to easily identify what must be submitted with every deal, along with a simple way to confirm whether or not the documents have been collected. All sales personnel involved with Special Finance must use this checklist or packet. It is the sales person’s responsibility to collect all of the documents identified in the checklist. Once completed, the SF/Finance manager then signs off, and thereby takes responsibility for collecting any extraordinary documents, as well as packing and funding.
A clean and well-organized funding package will move much quicker through funding—it is a fact!
As a sidebar, much of the “heat” that accompanies Special Finance seems to come from deals that are allowed to linger. With very few exceptions, if a deal is worked consistently for 10 days without approval, it will never be approved. Meanwhile, your inventory is running on the streets, with the mileage rolling and reconditioning escalating. Don’t prolong the agony!
To track the status of your contracts in transit, you should have a log (preferably electronic) so that all personnel involved in the deal can check the status easily. That log should include at a minimum the name, date contracted, lender, approval date, whether or not insured yet, when and how package shipped and a deal’s current status. Most DSM’s daily DOCs cannot create a complete and timely report to accommodate this, and therefore it must be created internally.
Finally, someone should contact every lender, every day, and discuss every deal until funding occurs. Why? To make sure that the package was received by the lender’s funding department, or that it hasn’t been buried on a funder’s desk. Listen to lenders—they will tell you that loans should fund within 48 hours of being received. Follow up will help facilitate it!
In the end, like so much of Special Finance, funding is a process—one of many required within the department. It is also an attitude. The difference between 21 days and seven days to collect money in the bank can mean hundreds of thousands of dollars in frozen capital for a dealership. It is also primarily the result of the attitude and culture within the dealership! What is your attitude?
Vol 1, Issue 1
