Automotive News F&I Special Sections of 2008 - (Page APR30) 30 • APRIL 14, 2008 finance & insurance NADA offers training in risky credit Announcing! DVD, manual shows how to work with subprime prospects Donna Harris dharris@crain.com As many as three out of five shoppers who visit auto dealerships have blemished credit, the National Automobile Dealers Association estimates. In response, NADA is offering dealers a training DVD and manual that show how to set up “special finance” departments that work with customers who have risky credit. The credit crunch has elevated the need for special finance experts, says Jim Ziegler, a finance and insurance consultant in Atlanta. Ziegler has helped dealerships create special finance departments. “Special finance is becoming a staple part of the business,” Ziegler told Automotive News in an e-mail message. Nearly every dealership that sells volume brands requires a special finance department or manager to address subprime customers’ needs, Ziegler says. F&I consultant Jim Ziegler: “Special finance is becoming a staple part of the business.” Hare Chevrolet, an Indianapolis dealership featured on the NADA training DVD, initially financed 25 special finance deals a month when it started the operation in 1995. The dealership says it now finances 80 to 90 such deals a month, at an average profit of $3,000 per deal. Knowledge counts NADA emphasizes that dealerships need appropriate staff expertise and lender relationships to sell vehicles to subprime customers. They also must make an adequate investment of time, says Mike Tamas, vice president of training for American Financial and Automotive Services Inc., an F&I vendor in suburban Houston. Subprime deals “are not going to get done in two hours,” says Tamas, who appears on the NADA DVD. “It will take time to explain the process and execute the process. These customers have to be able to prove income, prove residence, prove time on the job and typically have a down payment.” Lenders charge fees to fund vehicle loans based on risk. Rodney Salmon, an area sales representative for Triad Financial Corp., a subprime auto lender, says fees for subprime loans typically range from $95 to $495 per transaction. In addition, NADA says, dealerships must stock cars and trucks that special finance customers can afford. “Dealers must have vehicles with a wholesale cost of $7,000 to $12,000 and appropriate mileage, or their inventory will be virtually impossible to finance,” says Greg Goebel, a dealer consultant and trainer in Sarasota, Fla., who specializes in subprime finance. “Eighty percent of all funded deals by all finance companies operating in the special finance industry have monthly payments under $400 a month,” Goebel says. Special talents Dealers say the ideal special finance manager Has a background in usedvehicle sales, F&I or auto lending Works with many vehicle lenders Respects credit-challenged customers and works hard to get them financed chise dealership group in Murfreesboro, Tenn., has agreements with more than 20 lenders. But three of those lenders account for 60 to 70 percent of the group’s finance business, says sales director Rick Lee. Dealers say the ideal special finance manager has experience in used-vehicle sales, dealership finance or vehicle lending. An upbeat attitude also is important, dealers say. Special finance managers “have to feel they can make something happen to get every deal worked out,” says Steve Williams, general manager of a Saturn dealership in Clarksville, Tenn. Helping customers re-establish their credit is a good way to build loyalty to the dealership, Lee says. Largely because of Alexander’s special finance department, Lee says, “Our referral business is up dramatically, and our repeat business is outstanding.”c As seen on TV A special finance department requires a dedicated advertising budget, NADA advises dealers. TV infomercials and Internet finance leads are especially useful for promoting subprime finance, NADA says. TV advertising can provide a toll-free number for shoppers to contact the dealership. Dealerships also must have relations with enough lenders to address a broad range of credit risks, NADA says. Alexander Automotive, a multifran- Profit center For dealerships with special finance departments, the subprime segment accounts for a third of their overall finance business, NADA says. That’s a major profit center. GE Money - Warranty Services is now part of Wachovia Dealer Services Together we offer a comprehensive suite of F&I after-market products, retail financing and commercial services, providing end-to-end solutions for the financial needs of your customers1. Deal’s goal: Widen appeal of dent-repair coverage Donna Harris dharris@crain.com Vehicle loan delinquencies rise from 2007 NEW YORK — Delinquency rates on prime and subprime vehicle loans have risen over the past year, according to Fitch Ratings. Last month, the rating agency said, 0.63 percent of prime auto loans were past due by 60 days or more — a 16.0 percent drop from February 2008 but 34.0 percent higher than in March 2007. Of subprime loans, 2.93 percent were delinquent by 60 days or more in March — a 22.0 percent lower rate than in February but 33.0 percent higher than March 2007. For more information please visit www.geaws.com or call 800-828-1392. Commercial banking products and services are provided by Wachovia Bank, N.A., Member FDIC and Equal Credit Opportunity Lender. Wachovia Dealer Services, Inc., is a wholly owned subsidiary of Wachovia Bank, N.A. GE Money - Warranty Services is a subsidiary of Wachovia Corporation. ©2008 Wachovia Corporation Dent Wizard, which sells dent-andding repair coverage to auto owners, wants to expand sales of the product beyond its traditional luxury-vehicle customer base. So the St. Louis company has formed marketing alliances with two vendors to offer its Ding Shield service plan as a package with other aftermarket products. The partners are PermaPlate, which sells fabric and paint protection, and Sonsio, which provides coverage of road hazards to tires and wheels. The companies introduced their Assurance package in February at the National Automobile Dealers Association’s convention in San Francisco. The companies say bundling the products can help auto dealerships sell more contracts. “About 70 percent of the 820 dealerships that sell Ding Shield contracts are high-line dealers,” says Lindsey Bird, vice president of finance and insurance for Dent Wizard. “But we’ve started to get more traction from nonluxury dealerships since we introduced the combination program.” Bird says Ding Shield dealers sell Title committee created WASHINGTON — The National Title Solutions Forum has merged into the American Financial Services Association. The forum, which seeks to improve vehicle titling, becomes a committee within the association’s vehicle finance division. The forum was created in 2005 as a nonprofit organization. It has more than 35 members, including vendors, credit unions and banks. The American Financial Services Association is a national trade association for the consumer credit industry. It has 350 members. Owners of luxury vehicles have been the primary buyers of dent removal. about 2,000 contracts each month. The package sales could help the company boost that monthly volume to 2,500 contracts this year, he predicts. Dealerships can offer three levels of coverage: Mainline, Highline or Ultra Highline, Contract terms are for three, four or five years. Ding Shield coverage typically sells separately for $400 to $600, Bird says. The Assurance package retails for $900 to $1,500, depending on the term of the contract and level of coverage. Mike Davis is finance manager of Loeber Motors, a Mercedes-Benz, Porsche and Smart dealer in Chicago. He says 15 percent of the dealership’s finance customers buy Ding Shield. “We have not sold it as part of a package,” Davis says, “but we are considering it. That might add value.”c http://www.geaws.com http://www.geaws.com
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