Finance Manager 101: Got a Decline? Call the Bank!
Good work habits make good managers. We all know that, at least we should. I'm going to show you one good work habit that can help make you a great finance manager. If you do this one thing, you will definitely earn, and learn much more.
If you've made it to the position of finance manager in a car dealership then, depending on the dealership, you may have made it into the most lucrative position in the company. If you're any good, and your store is a busy one, it's six figures plus and the sky is the limit.
I am going to give you one little hint about how you can grow your income while growing your knowledge and career by installing one solid work habit. Here it is: when you get a decline from a bank or a finance institution for one of your clients, call the bank and find out why! Every time.
When I finally decided to strike out on my own a few decades ago, I started a little consulting company. I thought I knew a lot, but what I found out was that I didn't know anything at all. General rule of life: the more you know about something, the more that you can see that you don't know.
Anyway, my gig was to go into car dealerships, mostly new car franchises, and ask to review their declined deals. I would walk into the store, meet with the decision maker, maybe the GM or dealer principal and offer to review the turn-downs from the previous month and see what I could do to turn them into approvals. The deal was basically this; if I could turn a dead deal, a deal turned down for finance and considered lost by the dealership, into an approval, I would get fifty percent of the back-end profit. That was my fee. The dealer kept the front-end profit on the deal, and half of the back. Free money for the dealer. After all they had given up on the deal. Seems like a no-brainer, doesn't it?
The deal was this; if I could turn a dead deal into an approval, I would get fifty percent of the back-end profit.
Well, it wasn't. I learned two things very quickly. Dealers hated to pay me for something their business manager should have been able to do, and finance managers really hated me for making them look bad.
I remember walking into one of my first sales opportunities. It was a medium-sized dealership. The owner was present in the store most of the time. I gave him my sales pitch. "Just let me review all of your lost deals due to declines in the last month, and if I can get any turned over and delivered for you I get half the back-end, free money. How does that sound?" Sold. Walked me right into his business office.
"Let this guy take a look at your turn-downs, says he's an 'expert'! If he gets any done he gets 50% of the back-end gross." The dealer kind of had that "worth a try" look. "Costs nothing to look."
The finance manager looked at me with a kind of crooked head. Kind of like "Ok sure, here's one. Turned down yesterday by three banks. Dead. No deal here, give this one a try." He had that smug kind of look that said, "Good luck."
I opened the file, went through it. Nice deal. Warranty. Rust package, with the bank reserve it was probably like a three-thousand-dollar gross in the back-end. Checked out the credit application. Solid job. Stability. Now, keep in mind this is more than twenty years ago. Everyone wasn't pulling credit bureaus, non-prime was just in its infancy, and finance managers were more often than not just sales people in more expensive suits.
I grabbed the decline out of the file and called the bank, right in front of the dealer, and the finance manager. "Hi, how are you today? Great! Could I speak with a supervisor please? I just wanted to review a decline on a deal. Thanks." I smiled at the dealer and the finance manager. I was totally crapping my pants. This could be really embarrassing. "Hi, would you mind taking a look at a file for me, the client’s a good customer of ours and really needs the car. I just want to understand why it was turned down before I go deliver the bad news."
The bank rep said "sure", I gave him the details, and then he kind of started talking to himself as I sat in front of the dealer and the finance guy who both had looks that seemed to convey annoyance and arrogance at the same time. Probably like- something like that. I was getting smaller and smaller! But I can hear the bank guy talking to himself in the background. "Bureau's a little rough. Solid job. Couple of trade lines." Kind of mumbled a while then said, "So a good customer?" And so I glanced up at the dealer, "Yes, definitely." "OK, I'll give you this one, I'll fax it over right now."
The finance manager looked like I'd just ruined his life.
Done. Hung up the phone. "Deals approved. Approval is coming over the fax right now." I was expecting, "Wow, that was amazing! Thanks a lot, a deal we didn't have." But no, not really. First, to them, I didn't do anything. They saw me pick up a phone, ask someone to look at a deal, then say nothing else and get an approval. The dealer looks at the finance manager. "What the hell? You didn't even call the bank?" The finance manager looks like I've just ruined his life, most certainly his day.
The dealer basically throws me out of the store, and I don't get paid. Lesson learned. Dealers don't like finding out their finance managers are incompetent, and finance managers certainly don't like someone else getting a deal approved when they can't. I was going to have to figure out another angle on the whole self-employed thing, and I did.
But here is the real lesson. Why is it Finance Managers are reluctant to call the bank or finance source when a deal is declined? Is it laziness? Is it because it's just easier to send it to another bank? Is it because they think it's a waste of time? Whatever it is, it's bad business.
Here is what happens when you call a finance source following a decline. First, you make sure that you haven’t given up on a borderline deal that with a little extra push might turn into an approval. Second, you get some insight into why the deal was declined in the first place that may help you with the next finance source. Third, you’re going to find out what the lender likes and doesn't like on potential deals. Over time, if you call on every deal, you're going to learn all about the banks: the stuff they buy and the stuff they don't. You'll get to know all the bankers, make some friends, if you get my drift. What about if you're new in the business office and want to learn about credit, credit bureaus, banks, bank programs, loan advances, and more? You learn by talking to the banks, and you talk to the banks when a deal gets declined, or maybe when you're looking for some exception.
Even if you get absolutely nothing out of the call in the way of a deal or extra gross, you learn and you keep learning. So, do yourself a favour and the next time you have a decline, don't immediately shred that deal. Pick up the phone and call the bank, even if you think it's hopeless. It’s a great work habit and it’ll really pay off. Good luck and good selling.
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