... What lenders want from dealers
Bugbee: Dealers must buy-in on pay plans.
These items topped lenders' wish lists in interviews and panel discussions at F&I conferences in the past two years.
Lenders interviewed for this article stressed the importance of regular access at dealerships, ranging from the dealer principal and top managers to F&I managers who can discuss the nitty-gritty details of a particular deal jacket.
For their part, dealers and dealership managers cite access to lenders as an important factor.
"A lot of things can happen along the way in a transaction. In the approval process and beyond we like to have clean access to the F&I people," said David Satterfield, co-COO for First Investors Financial Services, an independent subprime auto lender based in Houston.
"We use cell phones, text, any number of ways we can get hold of them directly," he said.
"If you've got to go through the switchboard every time, over time you find you're losing a lot of deals."
When signing up a dealership, Satterfield said, it's important to get buy-in from the dealership's high-level decision makers. They may be the dealer principal, general manager, sales manager and/or finance manager, he said.
"I tell them what my specialties are and what my credit quality range is. If they say, 'I got plenty of them already,' that's fine, let's move on so they're not wasting my time and I'm not wasting their time. Everyone knows going in what to expect," he said.
Shaun Bugbee, vice president of sales and marketing at BMW Group Financial Services in Woodcliff Lake, N.J., said captive finance companies don't take buy-in for granted, either.
"One of the things you need is unfettered access to GMs and owners ... not just the decision makers on the floor," Bugbee said. For instance, he said, the dealer principal has a role in selling BMW-branded F&I products.
"There has to be dealer buy-in, with regard to the way their pay plans are driven. And from our perspective, of course, you need to have the right products that provide value. But if there's no agreement at the top of the store's management they're not going to be sold," he said.
The captive finance companies in particular feel as if they earned some dealer loyalty in the recent recession.
"If you look back to '09 and '10 when things got ugly, we're talking about keeping the owners in business," Bugbee said.
Some of the biggest banks in auto lending, such as Ally Financial and Chase Auto Finance, have made similar comments during F&I conferences and interviews. They say dealers ought to recognize how they stick with the business while other banks get in and out of autos.
A lender may reinforce loyalty by tying dealer incentives to sales penetration and to having multiple accounts with the lender, especially floorplanning.
The Ally Financial Dealer Rewards program offers the highest rewards for dealers that maintain loan and lease penetration for new and used vehicles, for floorplan, for auction volume -- and for General Motors dealers, for extended-service contract sales penetration. Ally Financial is the preferred lender for GM and Chrysler Group, among others.
Nissan Motor Acceptance Corp., which serves the Nissan and Infiniti brands, also offers a higher level of rewards for dealers who floorplan with the captive, said President Mark Kaczynski.
"A lot of it is, when you look at what we want from our dealers, we're looking for a long-term partnership. This includes the commercial side as well," he said.
Kaczynski said Nissan and Infiniti dealers are aware that Nissan Motor Acceptance isn't a subprime lender so the captive doesn't have an issue with dealers sending it applications it can't approve. "We don't tend to have a lot of those conversations," he said.
However, that can be a problem for lenders that concentrate on a particular niche.
In an interview in February AutoNation Inc. COO Mike Maroone said part of the dealership group's F&I training is aimed at getting the right applications to the right lender. "If all you're doing is to shotgun apps to a large number of lenders and you don't give them apps they can fund, then you're not accomplishing much, you're not in a relationship that's going to be sustained," he said.
Santander Consumer USA Inc. of Dallas has noted some confusion among dealerships about whether applications should go to Santander's deeper-subprime "Drive" program or to its less risky, near-prime Santander Auto Finance channel, the company said.
Santander announced in May that it became a "full-spectrum" lender by adding prime-risk loans. Since it now accepts all applications, that should end some confusion, the company said.
Satterfield of First Investors Financial Services said dealerships sometimes send the wrong sorts of applications. That's a main reason the lender insists on spending time with high-level managers whenever it starts a relationship with a dealership, he said.
"If we don't go through all that process early on, we may find we get 200, 300 apps and we haven't funded anything. You go back to the dealer and they say, 'I really can't use you.' There are so many things you can prevent," Satterfield said.
Lenders sometimes say they wish dealerships had a more long-term viewpoint.
For captive finance companies, that can mean looking at metrics such as owner loyalty that can't be measured until years after a particular loan or lease transaction.
BMW Group Financial's Bugbee said that long-term perspective is one reason why it's important for the lender to talk directly with dealers as well as F&I managers.
"You have to remind the players of what relationship-based vs. transactional means. Some of the guys on the front line have more of a 30-day mentality," he said. "That's a constant discussion we have."