A Finance Director Breaks It Down

Financials special report F&I economy

Heidi Byers is finance director for RideNow Powersports, a network of 26 dealerships in five states with corporate headquarters in Tempe, Ariz. Of all the finance changes, she says her stores are mostly adjusting to the cap HSBC recently placed on its three revolving cards: 130 percent of MSRP.

Byers refers to revolving finance in general as the "industry-killer" and has instructed her managers to be wary of it. Nevertheless, the stores have seen a shift toward the cards. Nine months ago, 80 percent of the dealer network's deals were installment loans, but that percentage has since declined. "OEMs go back and forth," Byers says. "They try to pitch why it's so important to have a customer in an equitable position by putting them on an installment loan. But then they get upset because floor traffic goes down because nobody can afford the payment, and they come out with these promos trying to entice the customers back on the cards."

RideNow is even paying for some promos: "If it's a good promo, the OEM is going to splash it all over the TV so customers come in and want it, and then the dealers got to fork out 2 percent," Byers says.

She has seen a dramatic decline in FICO scores, and the OEM banks typically require a down payment of 10 percent or 20 percent (though at press time we heard that some GE and Sheffield programs had eased back to zero to 10 percent). RideNow stores have struggled particularly to finance used bikes and off-road units. "A lot of banks are pulling out of ATVs and side-by-sides," Byers says. "Even scooters: Some of them won't touch them because the collateral is so minimal that they don't make much money because they get paid off so fast."

RideNow makes good use of secondary lenders. "Six to 10 percent of our financed deals are through local credit unions," Byers says. RideNow stores usually have direct relations with one or two unions, and many customers come in with their own.

But even the credit unions have pulled back a little: "Our credit unions, they still look at all types of units, new or used," she says. "But they've gotten a bit worried that they might be next on the chopping block. They've pulled back a little bit on their advancements, especially since they've had an influx in dealer agreements. But overall, I think they're still producing well."

Byers says union interest rates range from 6 percent to 8 percent, with members often getting better deals. Unions typically want a 10 percent down payment and always require full-coverage insurance. Most of them allow for online entry of applications, provide instant decisions, and are willing to work with the stores on declines and counter offers, Byers says. Unions usually do not offer any spiffs to dealers, she adds. Instead her dealers often pay the bank a small fee for opening the account.

In addition to Byers, we spoke with a few other finance managers at multiline stores. They report that even though advancement amounts are down, units are selling so far below MSRP that they have room to add accessories. Still, they say they've stopped preaccessorizing units. Two California managers using all three HSBC cards say the Yamaha one is buying the best at about a 40 percent approval rate. A Texas manager at a Honda/Suzuki/Polaris store says GE Money was buying almost nothing, with high rates on everything except Honda touring bikes and cruisers. He says half of his business is done with a credit union. Other managers praise only GE's Yamaha program.


Dealernews has posted a series of short profiles on banks that offer powersports loans at www.dealernews.com/lenders. At press time, we had about a half-dozen. Hopefully the list has grown by the time you check it out. One company listed, iNet Recreational Finance & Insurance (www.inetrec.com), is a broker for three lenders. The company offers loans only for cruisers with engines at least 750cc in size. Loan amounts range from $5,000 to $60,000, and the company looks at FICO scores 580 and above. Rates range from 10.95 percent to 18.95 percent, and there is no discount fee. iNet says it can obtain loans for new bikes and used ones going back 10 model years. For additional details see our Lenders page.

IOUs in Place of Profits

FinCo Management, a Massachusetts company that launched early this year, is bringing a novel concept to the powersports industry: It services "loans" made by dealers to their customers.

John Marlin, a representative for FinCo, says ideal transactions involve used units in which dealers can recoup their costs through large down payments and F&I add-ons. Dealers then pay FinCo $85 per deal to service the loans entirely: collections, repossessions, etc. FinCo is not a lender, and no money is advanced. Instead, the company charges 24 percent interest (or the maximum allowed by state law) on the amount the customer owes the dealer. FinCo gives the dealership the principle and keeps all the interest unless the store does at least five contracts per month, in which case it receives a portion.

Although the ideal scenario is outlined above, dealers decide what to finance, whom to approve, and for how much. The FinCo online system spits back recommendations. Dealers could choose, for example, to finance the entire amount for a new unit. FinCo will service loan amounts as low as $750.

FinCo charges no setup fees, and there is no monthly minimum. It offers its services in 30 states. Marlin says about 30 dealers have signed up. The program is intended primarily for automotive dealers, and a Fortune 500 company, Fiserv, actually services the loans. Marlin says that because of this, dealer portfolios would be safe regardless of FinCo's ultimate solvency. To learn more, log on to www.fincomanagement.com or call 800-435-3403.