The Subprime Auto Report

Who’s Your Daddy? An Important Question for Special Finance Managers

If you report directly to your General Manager, you’re doing something right. Or maybe your GM is doing something right. If you report to your finance director, you need to change this. You’re not going to succeed to your potential until you do.

I learned this lesson at a Ford store many years ago, where I started a special finance department. I was very excited about the position at first: the inventory was incredible (due to a very conservative used car manager who never put more than rough book into trades). I knew there was a ton of subprime traffic in the area and the hours were great. The store had very little experience with special finance. I thought for sure I’d be knocking the cover off the ball right away.

My first Saturday at the store proved me wrong. At about eleven, I was sitting at the sales tower, kind of keeping my mouth shut, trying to get to know everyone and learn their system. I knew there were three deals working and was waiting to see what the credit looked like. I was looking forward to showing everyone I knew what I was doing. The first deal, when it came to the tower, was on a three year old pickup truck with about 45 thousand miles. I quickly booked the car out using the NADA book I kept in my back pocket. The car booked great. I liked that. They ran the bureau, and I noticed that the credit score was about 550. I liked that too. I knew most captives wouldn’t like the miles, but that my special finance lenders wouldn’t mind.

Anyhow, the sales manager worked the deal nicely. After three pencils, and after dropping only $1700 off the starting figure, he had a deal, signed by the customer. He called over the finance director, Ted, my boss. Ted looked at the bureau, frowned at the mileage, and gave the deal to me (things were looking good at that point!). I said, “No problem, I can do the miles. The truck books well. These guys have real jobs, I can prove their income. I can do this one.” He said, “Great, let’s spot the car.” Then he grabbed the deal and gave it to his finance manager.

The second deal was a prime deal. The third, another special finance deal. He did the same on that deal as well.

At that point I knew why used car average profit was only $1500 and why his back-end numbers looked so good. Every one of these deals was a resign, and he knew it. Every bit of the hard earned profit on the deals was sacrificed when the customers came back to resign. Plus, with a much lower amount to finance, he was padding the deals with products, sometimes selling everything to customers and still keeping their payments the same or close to the same.

When his deals didn’t get financed, I inherited them. At that point, I had to justify a higher rate to the customer. Most of the time I lost the profit on the deal to keep the payments the same. Selling back end products at that point was close to impossible. Plus, customers leave unhappy, thinking they were deceived and tricked. My profits were pathetic. Instead of being a high profit source for the store, I was putting out fires and dealing with angry customers.

Does any of this sound familiar? If it does, you need to work some political magic. You’re going to need to establish credibility with your GM and dealer principle and change the culture of the store you are in. If you are talented and know how to generate business for your store, you deserve to have your own department. You are spinning many plates, using many skills and deserve the authority to say when deals should come your way.

If you can wrest control of your department from your finance director, with your own payplan and your own budget, you and your store’s best interests will be better taken care of. Your general manager will appreciate the healthy tension between yourself and your primary finance director. He will work harder to approve deals and you will work harder to show that sending deals your way can be more profitable for the store.

Basically,

It’s not easy, but I’ve done it a few times. On my next post I’ll talk about how to best accomplish this.

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