In working with dealers and their Special Finance departments around the country, sometimes you scratch your head and wonder, “Don’t they realize it is called Special Finance?

I am sure that when the idea of the Finance and Insurance department first started becoming popular back in the early seventies, there were dealers that felt the same way. “Why would we want to get into that? Look at all the paperwork it involves. How much of a market is there for it anyway?” Today, it is almost unimaginable to think of finding a dealership that does not have its own Finance and Insurance Department. That evolution took probably 15 to 18 years. During that time, it emerged as a pivotal profit center. For many dealerships, without it, the bottom line would change from black to red.

So why is it not the case with Special Finance?

With record numbers of bankruptcy filings last year, there is no lack of customers for the Special Finance department. It is estimated that easily one-half of the buying public has impaired credit. Just ask your F&I Manager or Sales Manager. The lack of success in Special Finance is certainly not due to lack of customers.

If there are plenty of customers, then what gives? Why wouldn’t the same dealerships that successfully brought the financing and sale of additional products in-house do the same thing for the credit challenged where the benchmark gross profit is $3377, representing at least 30 percent return on the dealership’s inventory investment.

It is simple. It is a combination of a lack of knowledge of what it takes to be successful, and more so, a lack of commitment. There are eight key components in making a Special Finance Department successful: commitment, inventory, personnel, lenders, marketing, deal structure, compliance and systems.

Lacking the knowledge or ability in the first six areas will almost always cost the dealership opportunities. It will be the difference between delivering a vehicle and not delivering. It will make a difference between a $3000 gross profit and one of $1200. It will make a difference between getting the deals (timely) funded and having to reel a vehicle and customer back in off the streets three weeks after delivery, hoping that the language in your bill of sale is sufficient to keep you out of trouble. Lacking the knowledge can keep a dealer from all of the above and more. Lacking the commitment is what will keep the lack of knowledge, and lack of success, sustained.

The Special Finance Department is perhaps the most misunderstood department in the dealership … if the department even exists at all. Perhaps it is because “technically” it isn’t even a department – or at least that is how it is viewed by the majority of Dealer Principals in the country. The factory doesn’t differentiate it on the financial statements; therefore, it must not count. Perhaps it is because so few of today’s Dealer Principals have had first hand experience with it. Whatever the case, the result is that less than 25 percent of the dealerships in the country have the commitment to maintain all the necessary components in place to have a truly successful Special Finance Department.

Actually, about one in five dealerships have a Special Finance Department. (That includes a number which simply have an individual designated to work with all of the customers with credit-challenged histories.) What they don’t have is the commitment from the top down to insure all necessary components are in place to allow the dealership to capture its market share. That is essential.

That brings up another question that perhaps caused the lack of commitment. “How many Special Finance deals should the average dealership be selling?” As long as a dealership is not a high-line only facility, 20 to 25 percent of its sales should be Special Finance sales. If a dealership is selling 150 units per month, at minimum 30 to 40 should be with sub-prime lenders. The achievers are now the ones that are selling 50 – 75 deals in that same sized location per month. Certainly the super-achieving clients of ours are exceeding 350 deals and more per month. One additional key point – this should be “plus” business, or in addition to what the dealership already achieves.

To be sure, many smaller dealerships exist where over 50 percent of their current sales are Special Finance deals. Smaller does not mean less mighty. Certainly Special Finance is an area that allows the smaller dealerships to compete on a more even playing field with the large dealer groups.

What can a Special Finance Department turning just 30 deals at a front gross profit of $3377 mean to a dealership; over a twelve month period, $1,000,000. That would be one million reasons why the commitment to have a successful Special Finance Department should be in place in every dealership, as well as all seven of the other components. The Special Finance Department is the single most misunderstood department in most dealerships. It is also the department offering the most opportunity.

That must be why it is called “special.”

Vol 1, Issue 3