Special Finance: Building a Core Group of Lenders

Special Finance: Building a Core Group of Lenders

Although entering into agreements with as many lenders as possible would allow dealers the most flexibility in lending to special finance customers, youre probably better off”particularly if youre just starting out”working with a core group of six to eight lenders. A core group this size gives you considerable flexibility in meeting your customers needs while still allowing you to develop and maintain consistent relationships with your lenders. There are several ways you can develop your core group of lenders:

· Use established contacts”Begin with the people you already know. In your experience as a dealer, youve probably already met representatives from several different lenders. Also, experienced special finance managers should certainly have a list of lenders theyve worked with previously.

· Speak with your prime lenders”Often, a prime lender will have a branch of the same company, or a subsidiary, or another company with whom they do business that offers special financing to the customers the prime lender cant serve.

· Work the phones”If you dont have enough established contacts to form your core group of lenders, your special finance manager should be able to call the lenders directly for more information. Lenders are plentiful, so”with a goal of working closely with six to eight reputable lenders”a good manager shouldnt need any more than a week or two to make the new contacts you need.

· Check with colleagues”Are there other dealers you associate with? Do you have contacts in your 20 Group or through your manufacturer who would be willing to help you out? It never hurts to ask.

Speak with their representatives”Special finance representatives are very likely to come looking for you, whether theyre expanding into a new area or looking to increase their business in an area they already serve. Lenders are becoming more flexible with their plans in order to accommodate todays credit-challenged consumers, and theyre pursuing the special finance business more actively. Dont wait for them to appear, but dont hesitate to find out what they have to offer when they do appear.

Once you identify your lenders, youll need to enter into official agreements with them. You may not need to know every detail of every program the lender has for potential buyers, but you and your finance manager should be thoroughly familiar with the details of the agreements themselves before signing anything.

This article is excerpted from A Dealer Guide to Building a Special Finance Department (SL38). To learn more about entering the special finance market, see NADA Management Educations latest training video, Creating a Special Finance Operation: Doing it Right (VT20). You may watch a preview of the video, which comes with a study guide, at http://eseries.nada.org/scriptcontent/ProductDetail.cfm?pc=MEDTAVT20. These products can be ordered online at www.nada.org/mecatalog or by calling NADA at 800-252-NADA, ext. 2.