Having worked in the Special Finance industry, first incorporating it into my retail stores beginning in late 1989 and then doing special finance training and consulting since early 2002, I have watched countless dealers “get in” the business and then “check out.”
Why Dealers Get Into Special Finance
The “get in” catalyst is often another dealer friend that relates (brags) about how much it has meant to their bottom line, or the opportunity to hire an individual that has been working Special Finance for another dealer in their market that comes with a “pedigree.”
Why Dealers Get Out of Special Finance
The “check out” is usually where the mirage disappears and the dealer either discovers that a) their contracts-in-transit have ballooned; b) they have to unwind a deal and the vehicle has damage; c) they have to buy a deal back due to fraud committed by the “star” Special Finance guy hired; d) their floor-plan company reads them the riot act because a dozen units should have been paid off and weren’t paid by their office manager because the deals hadn’t been funded, or e) they feel like a WWF referee because their F&I manager and Special Finance manager make Hatfield and McCoy look docile.
Right before the plug was pulled on the whole Special Finance operation, the total deal gross profits (if there were deals) were half what the industry *benchmark is – $3,522 per Special Finance deal retailed. The dealer looks at them-self in the mirror, shakes their head and wonders what in the world they were thinking.
Special Finance Today
Today, with simplified deal submission (Route One, DealerTrack, or ProMax) and full-spectrum lending, the overwhelming majority of dealers –especially franchise dealers– tend to take the approach of “throw it at the wall and it might stick.” If it does, a vehicle is sold and there is a mark on the board, but it is often not particularly rewarding for anyone.
In the first scenario, was the “bragging dealer” misrepresenting the facts? Probably not. I have been compiling special Finance Training the Special Finance Benchmarks for 14 years, the last 11 with our team at DealerStrong. Our sophistication of processing the data has changed over the years along with available technology. Now, the Benchmarks are based on millions of dealer transactions data points we receive directly. We know the year, make and model of the vehicle sold, and the credit score of the customers. Our data can tell you the front, back, and dealer reserve gross profits. We even know who financed it and other transactional details. With complete certainty, there is a massive difference in not only sales volume, but deal gross profits among dealers. Benchmark dealers operate with significant volume, good CSI, and with total deal gross profits averaging over the benchmark gross profit.
Special Finance Components
Since 2002 I have taught the Ten Critical Components for Success in Special Finance. The need for those ten components have not changed (although how they are implemented have) at all in the last 27 years. I have never seen a dealer operate at benchmark with any of those components missing.
Additionally, dealers missing any of those components will generally operate at or below average. For a Special Finance customer, on a used vehicle, that means vehicle gross profits of less than $1,000 and total F&I gross profits of about the same – when they can manage to put an approvable deal together.
Special Finance Training
Special Finance is not rocket science. The components have consistently remained the same.
However, implementation can vary greatly from dealership to dealership based on a whole host of factors. Many dealers are satisfied with being average and will accept whatever falls in their lap. For those that wish to operate at or above benchmark levels, a little bit of training goes a long, long way.
*Special Finance Benchmarks are available here.