Q.  How are special finance departments now working

with these unbelievable bank fees that are being

attached to client approvals? In California, I have hard-

working clients just trying to get a fresh start who had

strong credit in the past, but the current times have sent

them into a tailwind spiral. Drive Financial is leading the
pack with fees over $3,500 with a minimum of $3,000

down. All subprime finance companies then follow suit.

Banks are making a killing off the dealers. We have been
working special finance since 1995, and I have never

seen anything like this in my life. How are other dealers

coping with these ridiculous fees?

A.  Let me first say that the banks are not trying to rob anyone. They are doing what they have to do to price their paper accordingly in the current market. Financial institutions have taken a beating more than anyone over defaulted loans they shouldn't have been buying in the first place. However, in answer to your question, it's all about your inventory right now. You have to get as involved as you possibly can with your used car managers and understand what vehicles meet finance companies’ guidelines that you can buy relatively far back of book to help with the discount problem.

Secondly, I noticed the numbers you laid out for Drive Financial. While Drive is doing very well right now, you might look at how your deal structures are going across. There are ways to make a deal more appealing to Drive and to others, but more so, I would look at your current portfolio of available financial institutions. Drive should not be leading the pack. There are many other discount financial institutions that will take the same paper with a different look. Westlake (which is in California), A/L Financial and some others come readily to mind. You will have to adjust your thinking when it comes to inventory, but the market demands it right now. Also, look at your marketing and ask yourself, “What pond am I fishing in that is bringing me this type of customer, and is there a pond nearby that has a more appetizing fish?” I hope this information helps. Keep your head up. We will get through this and come out stronger on the other side with many new lessons learned. Happy selling!

Dan Henderson
Special Finance Concepts