Bank reps will walk through your dealership’s doors regularly with new programs or fresh strategies designed to sell more cars. However, if you’re not careful, you could end up with more sources than you need. Lenders are looking for more contracts to build their loan portfolio, not just more applications.
Look-to-book ratios will be monitored regularly to keep tabs on the cost of doing business with your store. Even finance sources that promote no look-to-book ratios have certain expectations – and the more contracts you send them, the better responses you’ll get.
Having and maintaining a good stable source of financing is critical, but having too many and trying to satisfy each one is a losing battle.
It would be great if one lender accepted every contract, but that’s not reality. Which is why it’s critical to have the right mix and resist the urge to overload your list with too many sources that you feel pressured to keep happy.
So what does the right lender mix look like?
There’s more to auto financing than simply prime and subprime. There are many variants when analyzing a credit report and deal structure, it’s important you fully understand every aspect so time isn’t wasted submitting deals.
The right mix will depend on your particular business model.
If you’re an independent operation you’ll be able to decide what market you want to go after. Some prefer dealing with a prime or a near-prime customer base, while others like the challenge of the subprime market.
For instance, if high-mileage vehicles are getting attention from the lending community, including some prime sources, don’t limit yourself to subprime-only lenders on those types of units. It’s important to keep tabs on your finance sources’ buying trends.
Stay on your toes.
If your finance sources are all performing well, approvals are quick, back-end allowances are healthy and funding is swift – that’s great! However, lenders occasionally adjust their internal score cards. It can be for a variety of reasons; including delinquencies, high volume or even a change in culture. Whatever the case, your top lender today may not be tomorrow, so keep your options open.
Analyze the numbers yourself.
Pull those detailed reports and follow the numbers. There’s no magic solution to lender selection and it’s not something you can learn from a training manual; you simply have to learn it for yourself and your operation’s metrics can be a great guide.
If you’re looking for the best lender mix for your dealership Vantage Finance can help. We are a virtual finance company that connects independent auto dealerships to a spectrum of lenders that many don’t have access to. Contact us today!