F&I TRAINERS have long preached the importance of local lenders. Research shows that dealerships that go beyond their OEM programs finance more customers. As standards tighten and the OEMs stop financing other brands, this is truer than ever.
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.” (Continued)