Who Has Money Available Today

The business of automobile financing has come full circle. I remember the days when I could call the dealership’s main lender with a shaky deal, package it with a couple of good deals and get it bought; but with that real “special” paper, it took a local finance company to get the deal done. Then came “special finance” when Auto One would finance people with fresh bankruptcies, repossessions and all sorts of credit woes—deals the prime lenders at that time would not touch.

Along with the approval came a bank fee of usually $995 and the advance was 110 percent. It was tough to make much money on those deals, but they were all added profit and we trudged on to higher sales anyway. Then came the heyday of special finance where you could talk AIB into 72-month terms on vehicles with less than 80,000 miles without limiting the back-end products, and if you had a large portfolio (regardless of how it performed), they would buy almost any deal for you.

Then came reality. As the secondary lenders began dropping like flies, the automobile finance heyday came to a screeching halt. Even at this point, there were lenders who tried the special finance paper route, and we have all ridden that tide as far as it would go.

Now, here we are. We have come full circle back to those days of fees, shorter terms, low advances and little-to-no back end. With very few lenders left, the lenders who buy the true special finance paper make us pay dearly for that service. Along with this tightening of the lending climate comes a renewed need for the local finance companies. At the same time, the prime banks are realizing they need this special finance paper in their portfolios, but to make it perform, they are charging fees and limiting our advances. Man, those bankers just aren’t any fun anymore.

So now, we are back to the days of using prime lenders, local finance companies and a few secondary lenders for some subprime paper. The prime lenders finance this paper, but with a little bit of a twist in rates, fees and advances. I must thank the prime lenders for taking on this business because without them, special finance would really be no fun right now.

If you are finding 80 percent of your special finance leads are unbankable, you are not alone. We are all suffering from this tightening in the lending atmosphere. Here, I just try harder to make things work and look for alternatives to making the deal work for this clientele. This is what we have done to survive. There have been many small lending sources rise up through these last five years. Our dealers are using local companies like Professional Finance Services, Western Funding, Nichols Finance, Atlantic Financial, Lendmark, Cresent and Eagle Finance, as well as local credit unions.

Look at a lien-filing report for your area to find finance sources that are buying paper in your area, you will also see who has dropped off.  Many dealerships are using these smaller alternatives instead of completely giving up the sale. Even the largest retailers in Kentucky are using these alternative financing options to put more deals together.

Survival has also necessitated that we utilize our prime lenders who offer subprime alternatives. Chase, US Bank, Wachovia, Huntington, etc. have all helped us put more deals together recently. The prime banks are limiting the advances and charging fees in some cases, but what’s a girl to do? Just make the deal!

Dig your heels in, work every lender for everything they will do. REHASH, REHASH, REHASH—even if you have another manager call after you do. Pull out all of the stops because you can get those deals done; it will just take twice the effort. Happy financing to you!