Structuring a Good Deal

According to a Federal Reserve report released March 5, 2008, the economic downturn, which started in the handful of states where the housing market was in the worst shape, is spreading to almost every corner of the country and to a wide variety of industries. The report described vehicle sales as "slow or sluggish, with little exception," and described lenders as resistant to spending money on capital projects and extending more credit.

In our current economic climate, it’s more important than ever to have a good business relationship with a proven subprime lender—one that understands how to get the best deal structured in order to meet your customer’s needs and your profit requirements.

Credit Acceptance is a publicly-traded company that has been in business since 1972. Credit Acceptance enables a nationwide network of dealers to offer its Guaranteed Credit Approval Program to every customer who comes to their dealership, regardless of their credit score. Using the company’s patented Credit Approval Processing System (CAPS), dealer-partners are able to provide customers with a written credit approval, also known as the Customer Presentation Sheet, on any vehicle in their inventory in 30 seconds or less.

Customer Presentation Sheet
The Customer Presentation Sheet is one of the key steps to structuring the deal and getting the down payment. It’s a written verification that shows the customer is approved for financing on the vehicle they selected. It outlines the price of the vehicle (including tax, title, licensing and other charges), the amount of financing the customer has been approved for, and the down payment required in order to take home the vehicle they selected.

In addition, the sheet provides the dealer with a quick and easy method for determining the most appropriate deal structure to provide the customer with an affordable down payment and the dealership with a desirable profit. 

The Customer Presentation Sheet is an important part of the deal structure and sales processes because it:

• Assures the customer they are approved for credit at the dealer’s store by giving them a unique 7-digit approval number in writing on the vehicle they selected
• Provides the customer with a detailed list of the information they need to gather to complete the transaction at the dealership
• Shows the amount of financing the customer is approved for on the vehicle they selected
• Provides a credible tool for the dealer to use to request the down payment.

Down Payment
After receiving the Customer Presentation Sheet and reviewing the amount approved for financing, as well as the amount needed for the down payment, the customer can then decide if they can afford the vehicle.

Experience indicates that the dealer should not try to figure out how much money the customer has for a down payment while they are on the lot. Rather, they should take the customer into the finance office after they’ve selected their vehicle to have a customer-focused credit discussion, enter the customer’s information into CAPS and present them with their Customer Presentation Sheet.

Deal Structure
If the customer cannot afford the down payment on their selected vehicle, CAPS allows Credit Acceptance dealer-partners to search through their inventory and identify vehicles that meet the customer’s means. This search can be completed in seconds and can be done with a variety of criteria (i.e., monthly payment, interest rate, etc.).

It’s imperative to be able to efficiently structure a deal for the customer. It can make or break a sale, and in the current economy, every sale is critical.

Credit Acceptance helps its dealer-partners do this through proven best practices, training programs and tools like CAPS so they can close the deal with every customer who comes onto their lot, regardless of their credit situation, and make the most of every sales opportunity.

Credit Acceptance is publicly traded on NASDAQ under the symbol CACC. For more information, visit www.creditacceptance.com.