Making Space For The Special Finance Case
There is much to be said for the straightforward pass or fail system Canadian lenders use to qualify consumer loans for vehicle purchases. There is also much to consider about people whose credit bureau scores are unordinary because they have lived through some extraordinary life situations. These extenuating circumstances alter livelihoods and damage credit standings. Instead of throwing in the towel these folks stay in the life game and try to move forward. For most of them, having an automobile is not an option; it is a necessity.
The ability to secure financing for credit-challenged consumers makes good sense for lenders who are in the business of making loans, for dealers who are in the business of selling vehicles, and for consumers who need to own a vehicle to take care of business. The special finance market holds promise for all parties that have a stake in the difference the business of special finance can make.
Special deliveries
Special finance departments have found a place in U.S. dealerships since the 70’s. Dealers who believe that a negative credit rating is not a permanent condition have not only captured a share of the special finance market, they have also capitalized on special financing opportunities to build customer retention. In a typical special finance sale, the customer is responsible for three additional purchases: The customer usually returns to upgrade the vehicle and refers two friends to the dealership. Additional deliveries can make the difference between a good month and a great month and produce bottom line profit on the financial statement.
Special services
Special finance customers are often sensitive to the benefits of policies and protection. The customer’s past credit condition may have been prompted by a serious illness or an injury that precluded working for an extended period of time. Or perhaps it was the result of an unexpected repair bill the customer could not pay. A dependable vehicle can go a long way toward helping a customer rebuild credit standing. Most special finance customers will agree that a major repair bill can be the tipping point for a tight budget. Vehicle service agreements offer valuable protection along the road to credit credibility.
Special Reviews
Does special finance take more time? Yes, it does. Loans need guidelines. Guidelines need flexibility. Flexibility needs documentation. Conducting a credit interview in a non-threatening environment is key to understanding the history behind a current credit rating. Attentive listening will reveal the reasons for delinquent payments. What happened to cause the financial hardship? Is the situation corrected now? What measures is the applicant taking to prevent a reoccurrence? Lenders want to make loans that make sense. The burden of proof rests with dealership F&I managers who can uncover the truth about special credit situations and convey the promise in that truth to gain lender approval.
Special opportunities
The dealership that judiciously undertakes a special financing function can gain additional sales while building a loyal customer base. Whether the moniker is “Special Financing” or more understated “Auto Loan Department”, the important elements are to place the customer in a face saving environment, provide a sound inventory, and follow ethical business practices. In a marketplace where lenders may telephone customers directly to verify information, Truth In Lending is a very special matter.
World of Special Finance – Canada, October 2005, p. 7