Special Credit for Finance Introduction

6 Mins read

Have you had trouble sleeping lately? Page Design Shop Been watching any “trash TV” or late-night infomercials? Then, without a doubt, you’ve been inundated with “Bad Credit Mania.” Every time you turn your TV on, somebody tells you that, regardless of how bad your credit may be, you can get approved for a loan, with no money down, for that beautiful high-line import sports car or luxury SUV. And payments that are so low, you hardly have made them. Come on in, and they’ll send you home in the dream vehicle of your choice with no hassle.

If you’re an automobile dealer or manager, you wonder how people can believe all this nonsense. No money down financing for bad credit customers is just another fantasy. But the dealership down the street is constantly flooded with ups while your guys stand around drinking your coffee and littering your used car lot with their cigarette butts. Meanwhile, that other dealership seems to be busy all day and night…why do they still have ups on the lot when you’re getting ready to close.

If this sounds like your dealership, you probably never heard of Special Finance. Maybe you have, but you’ve heard all the horror stories accompanying it. The “scuzzy “customers, their trashed trade-ins, bad down payment checks, and all the lies they tell to get approved for a loan. And the banks, oh, the banks you have to deal with for these people. They take forever to fund a deal if it gets funded. The only guy to make money on these deals is your “repo man” if he can find these people and get your car back! Why would anyone in their right mind want to subject themselves to this kind of aggravation?

Finance Introduction

But what if I could show you that, by ignoring these customers, you effectively eliminate up to half the customers within a 30-mile radius of your dealership? Imagine that over 50% of people around your dealership suddenly pack up and move overnight. Would you even have built it there in the first place? Probably not, but since you’re already there, why would you consider excluding these folks from your dealership?

Contrary to what you might think, this aspect of the business can be both profitable and clean, and these customers repeatedly repeatedly prove themselves to be some of your most loyal customers ever. They regard you and your dealership as a friend who helped them during tough times and will refer friends and family with great vigor, especially those in the same circumstances. They will serve their vehicles at your service department and will take advantage of your body shop if you have one. They will come back time and again and will continue to do business with your dealership for as long as you’ll let them. They are, without a doubt, the best word-of-mouth advertising you can get!

So, who is your store in the grand scheme of dealerships? Do you openly embrace sub-prime customers and make this business your main objective? Do your people run for cover when a special finance customer hits the lot, knowing that your F&I department has no interest in these customers? Do you dabble on the outskirts of special finance, doing only those deals which require little effort?


Research shows that dealerships traditionally fall into one of four categories regarding subprime or Special Finance (SFI). We like to call it “The Dealership Four Square”: The Bold Dealership is just that. He’s known as the special finance king. All his advertising dollars go toward the subprime market, and you can surmise that anyone driving one of his cars probably has a credit problem. The dealership caters to sub-prime businesses, so good credit customers may be reluctant to go there. If a 750 beacon walks in the door, he probably made a wrong turn!

The Enthusiastic Dealership is willing to do Special Finance but is typically not ready. There is no proactive marketing for Special Finance. Thus the limited business is generated from lot traffic,” Get ME, Dones,” and primary F&I turn downs. The F& I Turndowns are typical when the Sales Desk has a strong deal on a vehicle and is delivered to the customer on the Sales Desk’s “OK to SPOT.” These deals have been shopped to every primary lender with no success. At this point (often two days later), the Special Finance Manager gets the contract and is left to salvage a deal that was never handled properly. These stores see the potential for subprime but can’t figure out how the store down the street can deliver all their turndowns. They tend to take only the easy deals, and those that require some work usually get let out after the initial round of rejections.

The Necessary Dealership does Special Finance, but not consciously. The F&I manager knows something about subprime and can get a deal approved with some effort. His pay plan typically does not compensate him for subprime, so he pays little attention. His special finance attitude is that these customers don’t deserve a loan, but he is the BEST. He is the BEST. He is the BEST when he gets them approved! This dealership is concerned with the image that Sub Prime can conjure up. This dealership is not interested in being known as a “Sub Prime Dealer” and does not want to jeopardize its current customer relationships. This dealer is only interested in Subprime if it could be done with only the banker knowing!

The Unwilling Dealership has no desire to be in the subprime business. This store is usually one of the top dealerships, selling hundreds of vehicles monthly. Most of his financing goes through his captive source, and they tend to buy so deep many of what would be considered sub-prime at another store get done as primary in this store. Management’s philosophy regarding Subprime is that it’s simply not worth the headaches, and the few extra deals a month do not compensate for the previous nightmares this store may have experienced. What category does your dealership fall into?


You may already be in the Special Finance business and don’t even know it. If your F&I department is that good, you don’t hear many complaints about the deal that couldn’t get bought. While it’s doubtful that your staff closes every customer that walks on your lot, the odds are that you are probably selling some of these sub-prime customers to your primary sources. But we live in a world of maximums and super sizes, so why not have both on these deals?

We know that over 50% of the population surrounding your dealership has some credit impairment. Why would you want to exclude that many potential buyers from your dealership? Even if you’re a mega-dealer doing hundreds of units a month, wouldn’t it be nice to have another 25 to 50 sales on top of what you’re already doing? Remember that we’re not talking about abandoning the business you already have but expanding it.

Remember, special finance customers aren’t just those who sit home and watch Jerry Springer all day, trying to figure out where to cash their next welfare or unemployment check. They may be doctors, lawyers, lawyers, or other professionals who have just had bad luck. As the saying goes, “Bad things happen to good people.” These customers want to do business with a professional, not some fly-by-night operation they pass along the way. Additionally, these customers will provide additional business for your parts, service, and body shop. And the referral business they can bring could be well worth it in the long run. Remember, when everyone else says how bad business is, the quality of the customers coming into your dealership hasn’t changed; it’s the circumstances these people face differently.

1. The subprime mortgage crisis affects your subprime customers the most! Many are “victims” of these subprime mortgage loans and are unsure of their mortgage payment when their rate goes up!
2. These same people that we’re banking on the equity in their homes continue to rise, and many took out equity lines or second mortgages and now don’t have the equity left to support these loans.
3. The housing market is down, and many people who work there feel the pain. The construction worker, carpenter, framer, electrician, plumber, etc., all rode high when the new housing market was in full swing. Now, if they are still employed, many have gone from 70-80 hour weeks doing big overtime to 40 or fewer hours a week with no overtime. Income is way off, so many don’t have down payments available. Remind yourself that now is when you can shine. Most finance guys would walk away from this market because doing business is too hard. Don’t be one of them.

Geoff Cohen is a seasoned auto professional with over 30 years of experience. He has done everything, from sales rep to F&I Manager, New Car Manager, Used Vehicle Manager, to GSM and GM. He has also worked as an area sales manager for a major sub-prime lender, running his own BHPH and Auto Leasing/Brokerage company. He is the National Accounts Manager for Auto Lending Network. He is a contributing author to several blogs about Special Finance solutions for auto dealers and F&I Magazine, and World of Special Finance Magazine.

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