When it comes to special finance, the difference between good and great is very small. The common denominator among dealers who excel in SF is a carefully crafted and faithfully executed game plan. By following three very basic steps, you too can take your team from good to great, and very quickly.

Step 1: Nail Down Your Sales Process

For many dealers, the first step is the most difficult, but it can’t be skipped: You have to decide when to determine each customer’s ability to finance. If you are waiting until after they have selected a vehicle, you may have to rethink your process.

Sixty-five percent of used-car buyers have sub-680 credit scores. So why do so many sales pros — and even managers — fail to address the single most important credit question before it’s too late? A key aspect of SF mastery is learning how to gauge customers’ creditworthiness by asking inoffensive qualifying questions.

Luckily, these days, almost everyone knows what their credit looks like. You just have to open the door to the conversation. When they say they have credit issues, they probably do; if they have a 750 credit score, they will be proud to tell you. When that happens, go straight to the selection process. In all other cases, you must conduct a customer interview prior to selecting the vehicle.

Step 2: Step Up to the Desk

Proper desking is crucial to special finance success. When I first started selling cars, calling in a deal to a finance company meant literally picking up the telephone. Back then, you got a deal bought by having conversations with buyers and developing relationships. That was before the advent of the Internet, credit scoring and electronic systems that simplified the work of the credit buyer. Automatic scoring systems began to look for specifics inside a deal to help reduce the number of applications a buyer had to view and, over time, improve the portfolio.

The downside to this technology is that it also brought automatic turndowns. Even if a buyer wanted to help, in many cases, they couldn’t. Banks and finance companies paid big money for systems designed to watch out for their best interests; they had little reason to allow buyers to override them.

But all is not lost. Buyers still want to make good deals. They get paid for performance just like everyone else. Presenting a deal to the finance company in a way that makes it attractive enough to avoid an automatic turndown gives buyers the opportunity to massage it to maximize gross profit. By understanding payment-to-income (PTI) ratios and loan-to-value (LTV) guidelines, you can often turn a bad applicant into a good deal.

If a buyer earns $2,000 per month, and the dealer presents a deal structure that computes to a $500 payment, the buyer or system can decline it based on PTI alone. If the dealer submits a deal structure asking for a LTV of 135% right out of the gate, it sends up all kinds of warning signals in the system — and in the buyer’s mind.

Great SF dealers will take that same customer and present a deal to the finance company with a PTI of 15% to 18% and an LTV of less than 100%. That deal will be much more appealing to the buyer, and that should be enough to get your foot in the door. Call the buyer back and rehash the call.

Yes, you may have to switch vehicles to make it work. But in the event that you do, you have already presented the customer in a manner that makes the finance company want the deal.

Step 3: Stock for Success

As a former dealer, I have spent countless hours in the auction lanes and bought thousands of cars. Inventory is a tough game, and it has been particularly tough for the past three or four years. Top SF dealers have responded by finding new ways to buy cars behind NADA or KBB value in their markets.

Getting vehicles to your lot behind book is critical to gross profit. Even with a great sales process and a solid desking system in place, your success will only go so far without the right inventory. If you don’t have cars to match the finance programs in your store, you can get people approved all day, but they will have nothing to drive home. 

Ideally, your vehicles will have payments between $250 and $400, and land at least $500 back of book after service. This is the sweet spot for special finance. In today’s world, these are cars that have an actual cash value of $6,000 to $14,000, and you will have amounts to finance that top out around $17,000. Each store varies slightly based on the customer demographics in that area. If your customers can only afford $12,000 vehicles on average, it makes no sense to have a bunch of vehicles that are priced thousands of dollars higher.

Online auctions, Craigslist and even government auctions are all great places to find SF units. Dealers often ask which sources work. My answer is, “All of the above.” It takes daily management of your inventory to succeed in subprime. By understanding what you need — and adopting a process to obtain it — you will be prepared for any customer.

If you and your SF manager are too busy, incentivize your staff. After all, you pay a buyer $200 to purchase inventory. Why not pay your salespeople to find cars for you? Better yet, if they can get the seller to deliver their vehicle, you now have a potential customer.

I realize many dealers will read this article and say, “We already do that.” Maybe so, but you had better be sure. Meet with your sales and finance teams and ask if you really are following the proper sales and desking processes and stocking the right inventory. If not, you may be surprised how quickly your SF operation can go from good to great.

Shawn Foster is an executive trainer for DealerStrong with 25 years of experience as a general manager, dealer principal and consultant. SFoster@AutoDealerMonthly.com