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In my training, I always talk to special finance personnel about not stereotyping special finance customers. I stress for them to always remember at least one customer that they helped get financing when they were in a bad spot in their lives that was due to circumstances beyond their control. It helps to make the job so much more rewarding.
My one stabilizing customer was one of my first customers back in 1993. Their credit was perfect except they had filed bankruptcy. Special finance was in its infant stages and bankruptcies were not as easy to get around as they are today. I sat down with them and asked them what happened. They told me their daughter was born with a hole in her heart and almost overnight they had a half million in medical bills and the hospital was trying to sue them. It gave me great personal satisfaction to help these people purchase a tan Dodge Caravan.
Unfortunately, this was the minority of the customers that I helped get financing over the years and it was pretty easy to label the majority as irresponsible or something to that effect in regards to the reason they have credit issues; however, that will be changing in the very near future.
With unemployment astronomically high, foreclosures happening at an alarming rate, and the general overall recession in the economy that has hampered this country, the demographics of a special finance customer is changing greatly. Every dealership in the country is going to need to be prepared to handle the new breed of special finance customer.
Why? Because the customers that are used to buying high line vehicles are not going to all of a sudden start driving starter transportation. A lot of these people will be coming out of leases and needing new cars but now they have credit issues. High line dealers have been creating this flow of repeat customers for years by recommending leasing so they have to buy every couple of years. What are they going to do with a customer with credit issues that wants to lease a new BMW? How are they going to tell this customer that got 5% APR on their last bad credit auto loan that their rate is now 18%?
It can be done but it has to be done with a lot of sensitivity. Keep in mind that most people are embarrassed of having credit problems especially someone who has never had credit issues! These customers are going to ask questions and you need to be prepared to handle them. If done well, you will have customers for life but done wrong, you will lose out on this sale and future sales when this customer’s credit improves.
Now is not the time to shy away from special finance but to embrace it. A lot of lenders are getting more aggressive in their buying and this trend will continue. A lender that sponsors my training seminars (ACC) recently launched a foreclosure program. This is an indication where special finance is headed and the only question is are you ready?

Provided by the Auto News RSS Feed: The “New” breed of special finance customers

Auto Lending News Reports:

After failing a bank “stress test” in May, GMAC was given six months to raise $11.5 billion. Looks like as much as nearly half that money may come from the federal government.

Apparently, GMAC is in advanced talks with the Treasury Department for another cash infusion — this time, as much as $5.6 billion, according to the Wall Street Journal. (The amount could be as little as $2.8 billion.) The government has already funneled $12.5 billion into the captive-turned-bank — $5 billion in December 2008 and $7.5 billion this past May.

The latest cash outlay would come in exchange for preferred stock, which would raise the government’s 35.4% stake in the company if the shares were converted to common equity.

Aside from the Treasury funds, GMAC was approved earlier yesterday for FDIC insurance on $2.9 billion in debt. The move is meant to shore up GMAC’s ability to fund daily operations by making it easier to sell debt to investors. Already this year the FDIC has guaranteed $4.5 billion of GMAC-issued debt. In a nutshell, the FDIC insurance will enable GMAC to keep up its auto-loan volume, according to the WSJ article.

Provided by the Auto News RSS Feed: Fresh Funds for GMAC

Auto Lending News Reports:

In the past two years, lenders have focused on both retail customers and dealer clients to stem losses and improve operations. Specifically, lenders have tightened underwriting guidelines — raising credit-score minimums, lowering loan-to-value ratios, and shortening loan terms. On the dealer side, financiers are keeping tighter tabs on titling efforts and more closely monitoring dealer stats.

From what I can glean so far, it seems like the consumer-facing changes are working. Delinquencies and losses are coming down, and loan quality is noticeably improved. If lenders stick to these new guidelines, they’ll be booking loans with performance trends better than they’ve seen in years.

What I worry about, though, are the dealer-related efforts. Certainly, they’re a start. But from news I’ve seen lately about more dealerships shutting their doors and increased scrutiny by state attorneys general, lenders had better not let down their guard. In fact, when it comes to dealer scrutiny, lenders might need to redouble their efforts.

Provided by the Auto News RSS Feed: Halfway There