This document discusses the importance of special finance departments in auto dealerships. It identifies the top 10 critical components for excelling in special finance, including commitment from dealership leadership, partnering with appropriate finance companies, sourcing the right inventory, hiring and training dedicated staff, effective marketing, legal compliance, using proper systems, optimizing the sales process, handling phone calls effectively, and structuring deals to maximize profits for the dealership and finance companies. The document provides guidance and benchmarks for each component to help special finance departments improve performance.

1. DEALERSTRONG
Greg Goebel, CEO

2. “The Special Finance department is the
most misunderstood profit center and
opportunity in a traditional dealership.”
-Greg Goebel
Why?

3. Because …
It is the largest profit center that is typically
NOT broken out separately on an auto
dealer’s financial statement.
Sales and gross profits are buried inside the
info for the new and used car departments, as
well as the new and used F&I departments.
THERE IS NO SIMPLE WAY TO MEASURE IT,
AND THEREFORE, NO SIMPLE WAY TO
MANAGE IT!

4. “What is Special Finance?”
Define it in Order to Measure it.
Any customer, who arrives at the dealership
via Special Finance marketing (mailer, third-
party SF lead, SF website, etc.), regardless of
where they are financed.

5. Any customer financed via a Special
Finance company or program.
For full spectrum banks, any program
with double-digit interest rates and/or
fees/discounts.
“What is Special Finance?” Define it
in Order to Measure it.

6. Special Finance Industry Overview
Over 1M subprime auto loans per month
Thriving Industry, will continue to be through
4Q2016 and beyond.
80% of Dealers
Have Tried
20% of Dealers
Actively Engaged
<10% of Dealers
Excelling

7. Engage Customer
Foundation
Keys to Excel?
The Ten Critical Components
Commitment
Finance Companies
Inventory
Personnel
Marketing
Compliance
Systems
Sales Process
Telephone Skills
Deal Structure

8. The First
(and Most Important) Component
Do You Have the
Commitment to Make it
Work?

9. Commitment
Must have to drive all other necessary
components.
Starts from the top – the dealer – and must
include everyone.
Without commitment – volume and gross are
limited at best.

10. Why is Commitment a Problem?
Cash! Conflict.
• Comp plans
• F&I manager
penalty
• Sales comp
penalty
Not
measured.

11. The Second Component
Adding the Key Finance
Companies to Match with
Your Customer Credit
Demographics

12. Who Are Your Customers?
Know the credit demographics of who is coming to
your store.
Start with the National Definition of Credit Tiers and
Niches
Use National as an Example and Create with Your
Existing Finance Companies
Each Dealership must Define their own. Likely
Different for Every Dealer Location

13. Franchise Dealer Example
CB Score
Range
Unique
Apps
% of Total
Apps
Sold Del/Tier Avg. Gross
No Score 127 20% 8 4% $ 946
< 500 187 30% 7 4% $ 652
500 - 549 117 18% 5 4% $1,231
550 - 599 112 18% 6 5% $1,431
600 - 639 32 5% 4 17% $1,373
640 - 679 19 3% 8 29% $2,233
> 680 18 3% 10 56% $2,378
No Pull 21 3% 21 100% $ 889
Total 633 100% 115 13% $1,212

14. Working with the Finance Companies
Find companies for all credit tiers/niches
Understand they are like the sea
80%+ of volume will go to 5 – 6 companies.
Relationships are vital

15. The Third Component
Sourcing the Proper
Inventory to Fit with the
Finance Companies that Fit
Your Customers.

16. Inventory Opportunities
Must fit the dealership’s credit demographics and
finance companies’ serving them.
Concentrate on vehicles that provide monthly payments
of under $400.
Most with wholesale cost of $8,000 to $16,000
-$500 (often -$2,000+) < Wholesale Book Value
Goal: 30 day supply of units. Units = Sales

17. Sample Used SF Inventory Based on
Credit Tiers
Tier/
Niche
% of
Stock
Units Max.
Age
Max. ACV Avg.
Mileage
Monthly
Payment
Target
Tier No
Score 20% 6 9 $10,000 64,000 $335
Tier 4 30% 9 9 $7,500 70,000 $365
Tier 3
18% 6 6 $11,000 60,000 $390
Tier 2 18% 5 5 $13,500 55,000 $385
Tier 1
14% 4 4 $20,000 50,000 $380
Total 100% 30

18. The Fourth Component
Hiring, Staffing and
Training your Special
Finance Team

19. “I have never seen a high
dive by the talent ‘pool’ in the
car business, because it is a
really, really shallow pool.”
- Greg Goebel

20. Types of Department Structures
Separate Dedicated Staff in Dealership
• Typical of most operations
• Start small as one-two person “department”
• Pitfalls – conflict and wrong deal process
Blended Sales Floor
• Everyone works consistent process
• Focus is on delivering vehicle regardless of credit
• Used by highest volume dealerships

21. Personnel
Must Add Staff and Train
Personnel. Absolute maximum for one person department
is usually 18 deals if responsible for all functions
Maximum number of leads/
opportunities per person should be 75.
At onset – figure 1
person = 10 SF
deals.
2nd person should
add 10 additional
deals
If goal = 30 units,
you need 3 people
in department.

22. 2016 Benchmark Guides for
Special Finance Personnel
Position Percent of SF Total Gross Profit
SF & Sales Mgmt. (Total) 13.1%
Special Finance Sales (Total) 13.4%
Special Finance Admin. 3.2%
Special Finance Other 1.6%
Total 31.3%

23. The Fifth Component
Marketing &
Advertising

24. The Silver Bullet: It Doesn’t Exist!

25. 2016 Advertising Benchmarks
Benchmark ad expense increased in 2015.
At $3729 total deal gross (Fr), $496
per car sold = 13.3% of GP.
Independent dealers were only $488
per car sold = 12.5% (GP of $3,892)
Just launching, or in full growth
mode $575+ likely.

26. At benchmark, 10 additional sales require 100
additional leads or 35 additional lot ups.
Small departments should have ads drive phone
traffic to department manager or BDR trained for
SF calls.
Log traffic to measure your effectiveness.
(Consider a call-tracking source to measure
advertising effectiveness and for phone training.)
Marketing and Advertising:
Important Facts

27. The Sixth Component
Legal & Regulatory
Compliance

28. Potential Compliance Exposure
Gramm-Leach-Bliley
Privacy Act
Truth-in-Lending Act,
Polk v Crown
Telephone Consumer
Protection Act
(Texting)
Conditional Deals/
Spot Deliveries
Sale Documents
Regulation Z Issues
OFAC “Bad Guys” List
Down
Payments/Trade-ins
Red-Flag Rules
Credit Disclosure –
Risk Based Pricing

29. Sources for Compliance Help
•Tom Hudson, Esq.
•Hudco.com
•SpotDelivery.com ($349 per year)
Hudson Cook

30. The Seventh Component
Systems – The Glue
that Holds it All Together

31. Systems
Allows for consistent execution
• Lead management and sales activity tracking
• Funding
• Inventory management
Must have systems for:

32. Final Three Components
Now We Engage the
Customer!

33. The Eighth Component
The Special Finance
Sales Process

34. Keys to the Special Finance Sales
Process
Modify the typical steps to the sale.
Disaster strikes when you show (and sell) a
subprime customer a vehicle they cannot begin
to qualify on.
How do you avoid disaster?

35. Balloons!

36. 1. Meet & Greet
4. Vehicle Selection
5. Walk Around
6. Demo Drive
7. Trial Close
8. The Write Up
9. Silent Appraisal
10. Closing
Red/Green Balloon Sales Process
2. Qualifying Question
Delivery Delivery
Suggestions now based on Credit
The best way to lead a customer through the special finance sales process.
3. Investigate Needs

37. The Ninth Component
The Special Finance
Telephone Process

38. Phone Process Must Mirror Floor
Incoming sales calls present same scenario.
Ideally all sub-prime credit buyers are identified
quickly.
If not, salesperson misjudges customer and starts
selling vehicles, prices, etc.
Call guides or scripts are best used to prevent limiting
your options when the customer comes to dealership.

39. The Telephone: Where it All Begins!
SF usually involves the use of leads.
• eLeads or web based leads require outbound calls to set
appointments
• Leads generally require 7 – 8 calls to contact
• Average BDC rep can handle 250 leads per mo.
• Advertising usually results inbound phone calls
• Significant percentage of leads don’t get called!
All leads must be worked by phone.

40. Outbound Calling Philosophy
Confirm the appointment if it is not scheduled for the
same day.
#1 goal of the call: To set an appointment to come into
the store that will be kept!
Use a standard call guide (or script).
Call everyone, especially the eleads.
Time is of the essence!

41. The Tenth Component
Credit Interview
and Deal Structure

42. The Credit Interview and Application
Homeowners:
Land contracts – get complete info No mortgage – Deed or other proof
Renters:
Get landlord’s number Is there a co-tenant on the lease?
Co-apps – always put the best on top.
Always get three years employment and residence
history. Search for gaps!
No shortcuts! Fill out every blank on the customer
statement.

43. Rehash!
The finance company’s first call is generally their worst call!
They are making an offer to finance a customer they have
never seen on inventory they hope to never see and all they
have to look at is the credit bureau and what you input into
their credit application!
Generally $300 - $400 of leeway on average.

44. Deal Structure
Know your lenders’ guidelines before you
begin – “Who will buy what, and why?”
Price deal based on available advance plus
down payment. (Bottoms-up)
Always get the front-end gross first.

45. 4 Keys to Win-Win-Win Deals
Correct vehicle
(Inventory)
Optimum deal structure.
• Get vehicle gross first.
• Maximize back end call.
Down payment.
(It all goes to gross
profit!)
Rehash with finance
company.

46. Thank You. 
For More Information:
 Visit http://www.dealerstrong.com/
 Call our office @ 877-811-8107