Friday, January 4, 2008

Setting up Special Finance Procedures - Step One: Qualified Personnel






Setting up Special Finance Procedures - Step One: Qualified Personnel
by Arzu Algan from ADI

Today, gaining market share in the automotive industry is a battle. Any edge a dealer can gain over its competitors can mean the difference between victory and defeat. The industry’s latest battleground is the non-prime market. The non-prime customer population holds great promise for dealerships. However, conscientious preparation is necessary if this opportunity is to be fully embraced. Specifically, there are five guiding principles essential to the creation of a viable Special Finance Department:

Qualified Special Finance Personnel
Advertising/Marketing
Inventory
Lender Relationships
Organization/Effective Sales Procedures
Putting these elements together will set the dealership apart from its competition. Once these components are in place, dealerships are positioned to proactively pursue the profit available in the non-prime market. When the deal is structured correctly, the average gross from non-prime sales is typically higher than those from prime sales. Additionally, because many of these prospects are “credit captive” customers, they are often more receptive to advertising, and, therefore, easier to capture.


When properly pursued, the non-prime market allows dealerships to significantly increase profits and gain market share. The dealership increases its customer base by serving individuals which would otherwise be rejected from a dealer which lacks a special finance office. These customers, many of whom have suffered poor treatment at a competing dealer, will be more than eager to continue their positive business relationship with the special finance office.

Qualified Special Finance Personnel
Ultimately, a dealership will flourish or flounder based on the quality of its management and sales staff. Recruiting and hiring a dedicated, qualified staff is the first step in ensuring a successful Special Finance Department.

An effective Special Finance Department should consist of the following:

The Special Finance Director

The Special Finance Director is the key to the whole operation. The department must be lead by a competent, knowledgeable director if it hopes to succeed. This is particularly important during the department’s nascent stages, when the groundwork for the entire Special Finance operation is established.

The Special Finance Director is primarily responsible for maintaining lender relations, as well as securing approvals and ensuring timely funding. He or she also trains and supervises the staff and assists with deal structuring. In essence, the Special Finance Director supervises every aspect of the department, from such “big picture” concerns as building and sustaining positive relationships with multiple lenders to the fine details of an individual deal.

The Special Finance Manager

The Special Finance Manager works closely with, and oversees, the sales staff. They often act as a liaison between the Sales and the Special Finance Departments by actively encouraging communication between the two. The Special Finance Manager helps the Salesperson determine which vehicle is most appropriate for the customer. This decision is based on the customer’s credit history, debt to income ratio, and other personal information. The Special Finance Manager is also responsible for structuring deals to obtain approvals and contract the customer. This means they must structure a deal that will not only be approved by a lender, but will also include terms which the customer will find acceptable. A deal which is acceptable to the lender, but not the customer is of no use the dealership. At the same time, the Special Finance Manager is also responsible for closing the deals with maximized front and back end profit. This position calls for precise management, finding the most profitable deal possible while balancing the demands of the lenders with the desires of the customer.

The Special Finance Sales Representative(s)

Special Finance Sales Representatives are responsible for taking care of phone/ direct mail/ walk-in leads, setting-up appointments, maintaining a thorough knowledge of the dealership’s inventory and current advertising, accompanying customers on test drives, collecting stipulations and following-up with customers. They are an essential element in the equation for a successful Special Finance Department, being involved in the initial contact between the customer and the dealership, as well as guiding the customer through the final steps of the deal process. Should the customer feel the Sales Rep is unprofessional (or unqualified), they are likely to either avoid the dealership entirely, or walk away from a deal which could already be in process.

There must be enough Sales Representatives in the department to handle all the leads efficiently: one sales representative for every 100 monthly leads is often a good proportion. Just as important as sufficient numbers of Sales Representatives, however, is the appropriate treatment of these representatives. They must be properly educated in the handling of special finance customers, but they also must have a vested interest in the success of the Special Finance Office. Proper compensation of the sales representatives goes a long way in creating a successful department. Sales Representatives should be given the same bonuses as any other salesperson in the dealership; however, the best compensation plans are the ones where the same commission is given on both the front and back end profits of a completed deal.

Beyond The Special Finance Department

The dealership’s sales management, finance management and sales staff should be familiar with the entire special finance operation. Such cross training (in every aspect of the dealership) is a common trait shared by most successful dealers. This opens up the possibility of internal promotions within Special Finance Departments, without the loss of valuable time wasted on an external search for new employees. Thorough cross-training means qualified personnel are immediately available to fill an open position, making for a seamless transition.

Through sufficient training and cross-training, a dealership can easily ensure a viable Special Finance Department. In fact, an effective Special Finance Department is often a dealership’s most profitable area. This is only the case, however, when the Special Finance Department is run in an effective manner. While there are many different factors which impact the vitality of the department, success begins with the hiring and continued education of qualified personnel. Without this solid foundation, the Special Finance Department cannot thrive.

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