| How to Create and Cultivate Lasting Financing Relationships |
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| Written by Joel Kennedy |
| Wednesday, 30 September 2009 11:23 |
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For dealers, getting the right lender and financing support for your clientele can make or break you. Since mid-2008, building lasting relationships that meet the needs of your entire clientele has been tough. Let’s spend a moment examining why this is.
Lenders in the market have been dealing with a negative scenario borne out of two similar woes: credit markets seizing up and freezing and negative portfolio performance. Across the board (FICO ranges) lender-managed portfolios that were originated in ’06-’07 have performed negatively—far below expectations. Loss frequency, severity, and all other negative risk measures have shot up. Traditionally, lenders would cushion this performance with greater margins on newer originations, but, due to the lack of capital, this option is not readily available.
Many lenders have gone away and the lenders that are still lending are seeking greater returns at reduced risk. The overall result for dealers has been that finding and retaining lender relationships for lower-FICO buyers has been tough. But, all is not lost! There are still lenders out there and they want your business. Here are a few tips for how to go about finding and landing financing partners:
Think globally
Captive auto lenders and big banks are still out there and providing financing—particularly to the higher FICO buyers.
Search logically
Local banks and many credit unions are still active in their immediate markets. Don’t be shy about inquiring if they have plans to buy more, buy deeper, etc.
Get smart
· If you currently use a dealer application portal/platform, this should be the first place you hunt for new lenders.
· Check auto industry magazines and industry specific news websites. Many have stories that inform you of finance companies that have recently landed larger lending lines. Some even have running lists of active finance lenders.
· Network with F&I staff at other dealerships and with current finance sales reps to learn about who is actively lending and competitive in the market. You will be surprised at how easy the answers will flow.
Once you get in touch with additional financing sources (or the ones that match your clientele’s needs) realize that many finance companies perform a due diligence and want to see several years of tax returns and local bank statements before offering their lending program to you. Further, no two finance partners are alike. Dealer recourse, programs and stipulations, time to fund, and dealer incentive programs will vary. Weigh all your options and know that it ultimately comes down to a relationship and a commitment from both sides.
Joel Kennedy is EVP/COO and cofounder of Pelican Resource Group, LLC (www.pelicanresourcegroup.com), an innovative lending and servicing partner currently operating in the Mid-Atlantic region. For more information please call 866-989-9688 x702.
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