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. You are sharing the same frustration as every other dealer across the country who works in special finance. There are more and more customers with really bad credit and little or no money for down payments, and there are exorbitant discount fees with many of the companies who specialize in subprime financing. The only real long-term solution is to finance your customers yourself. However, many dealers don’t really know how, don’t want to, don’t have the necessary spare cash just lying around, or just don’t have the stomach for getting that deep into subprime financing—and collecting.

Buy here pay here is an integral part of the full spectrum of finance. Yes, it’s expensive. Yes, there are some risks. However, when you do the math you will quickly realize that it’s not rocket science and there is plenty of room for error. If you stay on top of the business and focus on originating clean, profitable and collectable deals, you can make a lot of money and more effectively control your own future. Those high discount fees belong to you.

Kudos to you for focusing on your existing customers for more business and better profits rather than concentrating your efforts (and advertising budget) on pulling in a better quality customer.

Another option for you would be to elicit the help other finance companies that actually share the “back-end” profit with you (i.e., those huge fees).

Good luck!

Tom Herald
Benjamin Herald Associates