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If you were looking online yesterday, you saw the big news about a jump in lending to folks with less-than-perfect credit. Since most dealerships stopped catering to that segment of the popluation as the economy tanked, let's take a look at what it takes to get back in the game and get ready for 2011.
How to rebuild/expand a special finance department
Obviously the first key to rebuilding a special finance department is to find the right personnel. A subprime manager must be experienced, but ambitious. Subprime deals definitely take more effort and work than your average prime deal but the pot of gold at the end of the rainbow is typically bigger if the deal is done right.
Also, as cliché as it may sound, birds of a feather flock together, and if you can get a customer done where other dealers failed, they will be sure to send their friends and family your way. A qualified special finance manager must be able to leverage personal relationships with lenders and local credit unions. The days of shotgunning deals to every lender in DealerTrack and looking for the best call back are long gone.
This leads into the next step, which is getting the correct portfolio of lenders. The old players of Americredit, Chase Custom, and CapitalOne are starting to get more aggressive with their advances, but it is important to have a wide variety of lenders. For those especially credit challenged customers this includes Drive, Santander, and CAC, but it is also crucial to develop relationships with local credit unions as well.
Last but not least, a special finance department is dependent on having the proper inventory of vehicles. Without the cars that fit their programs, a subprime lender will be of little help. The majority of subprime customers are not make- or brand-specific but instead are looking for a specific payment call. It is important for a dealer looking to increase subprime sales to keep a good mix of late model low mileage cars that fit between an 8k and 16k price range.
There are several ways to acquire these units from trades, auction or wholesalers but the best way is through keeping trades. The special finance manager will have to work hand in hand with an experienced used car manager to keep the right cars on the lot.
The time for action is now, and if your dealership does not take action, the one down the street will. Take this opportunity to expand, rebuild or even start from scratch your special finance department and take back the market share that is rightfully yours!