State of the Industry-Do You Know the Landscape of the Market?
By Chris Leedom
It is, and always will be, my belief that the answer to this question lies in the training arena. The implementation of correct knowledge and sensible processes provides ninety percent or more of the solution. It seems as though I have observed a dozen or more "experts" attempt to counsel dealers in this very specialized area over the past five years. Everyone from software companies to conventional F&I trainers have tried to jump on the bandwagon. But at the heart of it all still remains one question. How much do you really know about the sub-prime side of the business? It is, in fact, unique.
For 2000 I suggest you carefully examine your process in the sub-prime finance department. What checks and balances do you have in place? What stop-gap measures do you have in place to wave a red flag when there is a problem? How well do you know the employees in your sub-prime finance department? Why are these questions important?
Well, the primary reason is that more and more lenders are getting very serious about real or perceived dealer fraud issues. If you are not sure your process is 100% compliant, you better dig in. There is not a lot of room for error. Many dealers are lured to the sub-prime market by profit potential and there is a great deal of profit potential. But making sure you have the right process in place to limit the risk is ultimately more important than profit. Just ask any dealer who has had to buy back a portfolio of $500,000 or more.
My focus this year will continue to be helping dealers implement the best plan for capitalizing on this segment of the market. In these articles we will try to focus your attention on areas worthy of investigation. This month I encourage you to evaluate your processes and procedures in the sub-prime department. Look at everything you do within the course of selling and financing a car. Do you use a Deal Certification sheet to limit fraud exposure? What is a Deal Certification sheet? It is a form that two employees must sign verifying compliance with lender criteria and limiting fraud. E-mail me and I will send you a free template. It is just another part of a very complex machine. The bottom line is, don't assume your manager is all-knowing and doing everything right. Remember the old rule-Be sure to inspect what you expect.
Also, you may want to take a look at participating in some lender forums. This affords you the opportunity to understand where the market is moving and what is likely to effect your business. I keep a database of these events. Feel free to contact me via e-mail for some ideas. Just send the request to cleedom@dealeronline.com.
For now, evaluate these key items:
- What processes and procedures do I have in place to control my risk in the sub-prime finance department?
- How well do I understand my lenders' concerns? How may this effect my business?
- What training and development am I providing for my sub-prime finance personnel?
As you move forward this year, you will be able to rest easy in knowing that you have taken steps in these three critical areas.
Christopher M. Leedom is a Professional Twenty Group Moderator with NCM Associates of Overland Park, Kansas. He is a recognized industry expert on sub-prime finance and is the Chairman and Founder of NCM's National Special Finance and Buy-here Pay-here Conference. cleedom@dealeronline.com
