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When Suzuki announced last week that HSBC would cease to underwrite its retail programs at the end of the year, it included this statement: “Suzuki continues to hear many great stories with dealers maximizing sales and profits by building strong relationships with local finance sources. As always, Suzuki encourages your dealership to obtain local retail finance sources to complement Suzuki Finance.” But it’s not a walk in the park to obtain these relationships. Dealers in less-populated areas face an especial challenge. Nor is every credit union a joy to work with. “I still got a credit union here about 12 miles away that has a monthly credit committee that meets and makes the loan decisions,” says Jim Dirks, finance director for Killeen Powersports in Texas. “They’re still living in the ’60s. You put in your loan application on the fifth of May and like the 15th of June you find out if you were approved.” Nick Arce is finance manager for multiline Northland Motorsports in Flagstaff, Ariz. “I’ve been having to use credit unions — which are really hard to deal with in comparison to our manufacturer financing — just to get people decent rates,” he says. “They’re just taking forever to get deals done, like two, three days, and nobody wants to wait that long.” Arce also has a less-common problem. Around 40 percent of his customers hail from the Navajo Indian reservation. “We have a lot of credit unions that won’t finance there because they can’t repossess there,” he says. Some dealers are seeing more turndowns from their unions. Carlo Hansen, co-owner of Riverside Kawasaki in Somerville, Mass., says his local credit unions are spooked like everybody else. One of them is not accepting any applicant with a credit score below 650 whereas before it would go down to 580. “I think it’s the sheep effect,” he says. “Everybody is scared at the same time. All the news is bad.” A Minnesota dealer, on the other hand, says he’s still able to get walk-ins approved with a credit union within a couple of hours. Customers often just wait in the store or get a bite to eat nearby and then return. Experts Chime In Bill Shenk is an organizer of 20 Groups who works with about 80 dealers. “I just did two meetings in Dallas this month,” he says. “At the last meeting there were several dealers who had just inked deals with credit unions that have money. They’re financing everything, used Harleys, used Hondas, whatever. And the percent financed has not dropped as much as you’d think.” Many dealerships don’t know how to approach credit unions, Shenk says. “Here’s the key mistake that’s made in most dealerships: The owners believe it is the finance manager’s job to establish that relationship and find the money. That is wrong. It’s the owner’s job to find it and establish it. It’s the finance manager’s job to administer it professionally.” Shenk suggests that dealers have lunch with an employee of their local union. A good relationship can pay big dividends when it comes to timely approvals, he says. “We got guys who are doing the deal and then calling the credit union and saying, ‘Mr. Smith is coming over. Here is all the information. Can you have somebody ready to do his paperwork in 30 minutes? He’s going to have an envelope with everything in it ready to go.’” Shenk admits that many dealers aren’t willing to do so much work. “You just got to jump through the extra hoop,” he says. “The reality is, when the other dealers aren’t doing it, it just makes it that much more opportunity for those who are.” Steve Zarwell is an industry consultant and Dealernews columnist. He reports that some dealers don’t like credit unions because they typically pay a finder’s fee instead of interest participation or some other kind of kickback. “I’ve seen the finder’s fee as high as $200 and low as $50,” he says. “It averages $150. So a lot of dealers who in the past made money in financing — and essentially those days are nonexistent — they don’t like the idea of making only $150.” That attitude is shortsighted, Zarwell says. “I ask them, ‘Why don’t you forget about the $150 and just not sell them a motorcycle?’ The credit union enables them to have a customer, and they get $150.” The finder’s fee is often negotiable, Zarwell says, as are the other terms of the relationship. Typical questions to ask a credit union: What will you loan up to? Will you base the loan amount on the price invoice or the MSRP? And will you add $500 so I can include an extended warranty or something else? In an F&I report we published last year, Zarwell suggested (only half jokingly) that dealers with only three or four sources of financing should be horsewhipped. He said a good place for dealers to start shopping is their own banks, though they shouldn’t stop there. “I’ve actually gone to a store, looked in the phone book, printed it on the copy machine and said: ‘If you’re lazy and don’t want do it, then take Sally up front, the greeter, and have her call all these people and ask them if they do motorcycle loans.” |
