I am going to tell you one common mistake made by many finance managers at many car dealerships. It’s called killing your deal before you even start… or, submitting for a decline.
If you’re a finance manager, I want to run through an all-too-common scenario and see if it sounds familiar. If it does, then you need to sharpen your skills because you’re likely losing deals and money.
You’re a finance manager in a typical new car store. You take turnovers with clients who have just agreed to purchase a new or used car. You spend some time taking a credit application and then it’s on to selling a bunch of stuff. The client signs a bill of sale. There is some discussion about when they can pick up their new vehicle, and off they go. Job well done.
Then you submit the deal to the bank, and shockingly it gets declined. Most of your clients have good credit so what do you do? “Well, I’ll just submit it to another bank! Ya! That’s what I’ll do!” And away we go, bank after bank, decline after decline, like somehow this deal is magically going to change from a bad one at one bank, to a good one for another. If you're super lazy, you just shotgun the deal to a whole bunch of banks at the same time so you can get the declines all at once!
The deals that you’re blowing up in your office might be the most profitable ones you ever see.
I am going to tell you something you may not know. Those deals that you are blowing up in your office could very well be the most profitable ones you ever see. Clients who have more challenging credit do tend to buy more aftermarket products. That’s a fact. I’ll let you figure out why.
Yes. All banks have different buying practices. Different ways in which they adjudicate credit. Varying tolerances for debt service. Varying allowances for vehicle advance. And if you’ve been at this for a while you will also know that they change those regularly. What a bank declines one day, may become an approval the next.
Knowing what the different buying practices and programs are for each finance source you deal with is a key element in maximizing your approvals. But just shotgunning your deal to a bunch of banks without stopping and doing a deeper dive into why the deal is being declined is a huge mistake. All you are doing is likely just submitting for a decline, or at the very best taking a shot in the dark. But why stay in the dark when all the information is there for you, and all you have to do is look?
First of all, I would highly recommend that you pull a credit bureau for every finance client even if you are in a new car house and most of your customers have good credit. It makes you look more professional, cements your advisory role, and gives you some insight into the client. If you don’t pull one up front, then do yourself a favour and make sure you pull one once you get that first decline, before you move any further. Look at the deal. Look at the credit. Calculate the debt service. Call the bank and find out why the deal was declined. Call the client if needed to gather some additional information. Arm yourself with all the information you can gather to give yourself the best chance of getting an approval at the next bank or even potentially overturning the decline you have at the first one.
Arm yourself with all the information you can gather to give yourself the best chance of getting an approval.
Maybe you figure out that, with one or two tweaks on the application, it’s an approval. Maybe you figure out that debt service is an issue, and you need to pay out a few things to get it in line. Maybe it’s a thin file and you know which bank might buy it, if you haven’t already sent it to to ten other banks. One thing is for sure, as you dig into each turn-down, and speak with each bank, look over credit bureaus, and speak with clients about their credit, you hone your craft. Build your knowledge. Gain valuable insight into the buying nuances of banks and finance companies. Pretty soon you’re a professional.
Getting into the habit of researching declines in detail before resubmitting to another bank is a best practice for every finance manager seeking to improve their skills and increase their earnings. The outcome being increased knowledge about credit and increased knowledge about banks and finance, both of which will lead to fewer lost deals due to decline and a general positive impact on your sales and career as your knowledge base grows.
So the next time you get that decline from a bank, don’t just fire it off blindly to a bunch of banks in the hope that someone buys it, or in the rush to get it off your plate. Take a step back and look deeper. Maybe you’ll learn something. Good luck and good selling!