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The first in a series of Eight Articles on the Eight Essential Elements of Special Finance

With each new year, millions of people take the time to establish resolutions for personal change and improvement. Often it may be to simply lose weight, quit smoking, save money or make more time for your family. Dealers and management teams usually use January (or the last months of the previous year) to set goals and establish plans to achieve improved performance for the upcoming year. With late January through March often considered the best time of the year for Special Finance, this is one area that usually receives renewed attention.

It is often the time of year when the phone rings off the wall for assistance. Between the phone and e-mail, I receive endless requests from dealers and managers looking for that “silver bullet.”

When working with dealers, I first always assert there is no silver bullet. No snake oil, no potions and no elixirs either. Special Finance really is simple and something that dealerships often make extraordinarily complicated. There are eight essential elements required for the department to succeed. Those elements are (in order) Commitment, Inventory, Personnel, Lenders, Sales Process/Deal Structure, Marketing, Compliance and Systems. When I begin working with a dealership that seems to be struggling, my first task is to look to identify which of the elements is broken or missing.

As a result, for the next eight months I am going to cover each of those elements one by one in order to perhaps offer readers tools that they can use to examine their own departments. For the first month of the year, I start with the foundation of it all: Commitment.

Why commitment? Why is commitment so important? Most people think that commitment would be the most simple of all the elements since it really is a state of mind, an attitude or philosophy if you will. I would agree. It is the most simple. It is also something that is identified as a component for success in virtually every other department in the dealership (and life for that matter). If a dealer is committed to success in new cars or used cars or service, then why should Special Finance be any different? That indeed is the $64,000 question.

The problem is that it takes commitment from the top down, all the way through the dealership to provide the other seven elements needed for success. It is that commitment which defines the culture. I often find the “stated” commitment at the dealer principal level, and even the GM position.

I say “stated’ because they make the statements such as “We are missing business in Special Finance and we are going to find a way to make it work!” Then I field countless calls and e-mails from Special Finance managers (often One-Man-Bands working within the new or used car departments) that are frustrated because they can’t get their GSM, GM or dealer to provide them the necessary tools to succeed.

Generally, I am not talking about tools that cost thousands of dollars. We know that it takes eight elements to succeed. Often the SF managers are very well aware of what it takes to succeed. They have discovered that they can’t put deals together because available inventory is too expensive, or, because they have a sales process that causes deals to wind up in the SF department after the customers have been worked to death as a conventional finance customer on a vehicle that can’t possibly be structured for SF.

These missing tools all relate to the lack of commitment to the department. The dealer may be on board. Maybe even the GM is committed to making the department a success. The problem is that someone – maybe the GSM, maybe the Sales Manager, maybe the Used Car Manager or maybe someone else - is not committed. Without them on board (maybe simply due to not being educated on the necessities of the department) they cause roadblocks to exist.

This scenario is extremely common. It also causes a couple of endless cycles. Missing the commitment leads to other missing elements. Without those elements, Special Finance sales volume and gross profits seldom rise above mediocrity at best. With lackluster performance levels, the commitment to the department weakens even more, and, well you know the rest of the story.

So why is this commitment so difficult?

It may be a few reasons. First, 80 percent of the dealerships in the country are not actively engaged in Special Finance. That isn’t to say that probably 80 percent of the dealers in the country haven’t attempted Special Finance. It simply means that due to a lack of commitment and the other necessary elements being present, the departments never succeeded. Then they simply waned away.

Second, Special Finance is a relatively new profit center. Yes, it has been around for 15 years or so. But 15 years after F&I departments came into existence, there were still a number of dealerships that had not committed to F&I departments.

The point being most GMs and dealer principals still have risen through the ranks to their positions without having had the benefit of working in or around a successful Special Finance department. Without that experience, some of the dots still haven’t been connected. Until then, the necessary commitment is difficult to fully appreciate and embrace.

Finally, it may be those that aren’t committed don’t really understand that they aren’t. Having been a dealer for 18 years, and an owner in the automotive industry for 23 years, there wasn’t much that I didn’t believe that I couldn’t do or wasn’t capable of accomplishing. I don’t believe that is a particularly uncommon trait for dealers and executive level managers. (Some might read this as “ego.” I prefer to call it, er, confidence.)

Looking back, there might have been a few times that the level of my “confidence” may have limited my ability to grow my business in a particular area or manner. In any case, I still offer it as a reason why necessary commitment may not be present.

The challenge, regardless of the reason, is to identify whether or not adequate commitment is present. If it isn’t, then I offer (again, no differently than with any other department) you must find some way to focus it.

I always say it is like being “kind of pregnant”... you just can’t “kind of be in” Special Finance and expect to be successful. It often is said that the speed of the leader is the speed of the pack. Whoever is not committed is not up to speed.

As we roll into the upcoming year with most dealerships channeling their focus on preparations for a yet a more profitable and successful new year, commit to your Special Finance efforts. With Leedom and Associates SF benchmarks at $3439 gross per SF unit sold, gross profits on SF deals generally are much higher than those of conventional credit customers. Those are gross profits that all dealers are able to avail themselves. Shouldn’t you be one of them?

Vol 2, Issue 1