Outside of the perpetual questions about what advertising strategy is driving the most traffic, one of the most common questions posed to me is, “How long should it really take to get my deals funded?”
First, let me define what starts and stops the clock. It begins when a vehicle crosses the curb in possession of the buyer, whether or not you have a hard approval yet. In states where you cannot spot deliver, I consider it delivered when you put the buyer out on a test drive agreement with the intention of it being a deal.
The funding process ends when you have anticipated collected funds in your checking account—not when you receive a funding fax. Occasionally EFTs don’t make it to the intended bank accounts, and often they don’t arrive in the expected amounts.
Now, let me build the suspense as I walk you through the funding timeline of a clean deal, emphasis on clean. This will generally be your best case scenario – absent any hiccups.
In most stores, business seems to occur in the late afternoon and evening. If your customer arrives at the dealership during that time frame (we’ll say Monday for this example), there is a strong chance that the deal will not be approved that same day. Even if there was a chance, in all likeliness you are past the time of day where you can break the deal down and get it shipped overnight. In any case, savvy departments will likely choose to spot deliver the customer rather than risk losing it to a competitor down the street. At that point, the clock starts.
The next becomes day one (Tuesday), and the SF manager gets the approval from the finance company and/or gets the missing documents collected in time for the deal to be broken down, packaged and shipped overnight that day.
By the time day two arrives (Wednesday), your deal is arriving in the offices of your finance company. Even if it arrives by the most expensive method, (priority or morning overnight service), by the time it gets through receiving and is logged and routed to the funding department, it is most likely early afternoon at best. Unless the funder is a former college friend of which you hold embarrassing photographs and stories, your contract blends into the rather large stack of contracts that each funder receives and has to process every day!
From here, the auditing and verification process begins. Each funder must painstakingly check the paperwork to make sure the numbers are correct, all of the blanks are properly signed and initialed, and all required documents match what was both requested and indicated on the contracts.
A customer interview is most often required during that timeline. We’ll say that you are lucky and that the customer actually is available and answers the phone when the funder first places the call. Even lightning-quick funders will generally need 24 hours to complete this process, which moves the timeline into day three (Thursday).
During day three, if all has gone well, you should receive notification that the deal has funded (when it is finally approved, in reality) and that the EFT process has begun to get funds transferred into your checking account. You say, “Great, just three days!”
Not so quick.
The banking system doesn’t work that fast. If they are able to initiate the EFT on Thursday, the only thing that shows in your checking account on day four (Friday) is a memo or pending entry. You may be able to see that money is coming in, but with most banks, the funds aren’t collected yet—meaning you can’t spend them. The money actually posts after the close of that business day.
Days five and six fall on the weekend and bank postings don’t change. That means day seven (Monday) is when the money is actually considered collected and in your account. Please note, I said this is a best case scenario where there are no missing documents, everything verifies and the customer is readily available for contact.
With that, the long delayed answer to the original question is, “Seven days.” This should be the target of the Special Finance manager. The average among SF departments is 14 days when measured in the same manner.
Seven-day funding is indeed possible and reasonable for SF contracts. When it is attained, you will shave a week off the average funding time. If an average SF contract is $16,000 and your department is doing 25 deals per month, one month’s worth of contracts in transit equals $400,000. Therefore speeding up your funding to a seven-day turn puts just over $93,000 cash back into play, which will most certainly improve the temperament of the dealer, general manager and controller.
Vol. 1, Issue 2