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Amy Taggart

Amy Taggart Marketing Manager

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How Special Finance Differs from Other Types of Finance

In my last post I wrote about what pops into an auto dealer's head when you say "Special Finance." For some car dealers, this category of financing is too troublesome to bother with. For others, this is all they do.

Let's take a closer look at how putting together a financing deal for a Special Finance or subprime customer differs from financing for a prime consumer.

I sat down with one of our dealer relationship managers, Nicole Diamond, to get her take on the differences. For those of you who don't know her, before she came to us she put in 16+ years in finance, including supporting car dealers with prime and subprime lending for SunTrust Bank. So she knows the deal.

What it really boils down to is risk - for the dealership and for the bank. A dealer has to look at a combination of factors when reviewing a special finance loan application in order to ensure that it's a good deal for them, including:

  • Employment & Income
  • Beacon Score
  • Downpayment
  • Stability

Underlying all of that analysis is the people element - dealers have to have good relationships with their lenders in order to get some of these deals done. Lenders have requirements for risk that they have to meet, and they manage their portfolios based on serving their dealer client base and limiting their exposure on the downside. Only a certain percentage of their lienholdings can be outside of the Prime category of credit.

By building a good relationship with their lender based on trust, dealers can get their financing packages turned around more quickly. Dealers that have earned a lender's trust by bringing them good customers also enjoy a little more flexibility when it comes to getting their Special Finance deals done.

This element is key in the Special Finance world, which is a far cry from the cut-and-dried Prime lending world.

I've just scratched the surface on this topic, and you can already see how complex this kind of lending is. And having a kind of lending support system in place is crucial to running a successful Special Finance department.

Continuing on in this series, we'll look at some of the other aspects necessary to working in Special Finance. Watch this space.

In the meantime, feel free to hit us up with any questions via Twitter at @carloanco. Look forward to hearing from you.

Chris Costner
Thanks Amy. I never understood why some dealers don't want to get involved with "special finance" business. I agree it can be tough at times and requires work but the bottom line is that they are potential clients wanting to purchase a vehicle. It's an opportunity for dealers to make another customer extremely happy and create a long term relationship. I believe dealers should put in the work to "paint the prettiest picture" the correct way and then use their lender relationships to make it happen. Of course not every situation warrants an approval but it isn't the dealers call. Saying that, how much paper never even makes it to the lender for review? We are in the service business and should give the same effort to all. That's my opinion and the way I see it. Thanks for sharing.
Amy Taggart
Thanks for commenting Chris - it's true that there are some dealers out there who won't even bother to send the paper out for review if it's not just so. Human nature, I suppose. It would be great if there were more dealers who thought the way you do!

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