Remember the famous seven last words: “We've never done it that way before!”

Since 1994 special financing in automobile dealerships has continued to grow and prosper. But many dealers find themselves struggling to maintain this profit center. A key to that is management setting parameters that will insure success.

Remember the famous seven last words: “We've never done it that way before!”

Today, more than ever, it is important to eliminate these deadly words from every staff member's vocabulary. Special finance continues to change and bankruptcies have risen to all new levels so we must be prepared to take advantage of the tremendous opportunity to increase market share, reduce aged inventory, earn above average gross profits while building a base of loyal customers.

The following outline will help in maintaining and improving the special finance department.


This starts at the top and is instrumental as the department grows. Commitment to training, inventory, advertising, lender relationships and proper execution is a key element for success.


Holding staff members accountable will prove the level of commitment and eliminate problems early.

Business plan

This should outline all areas of the department for at least 12 months. Business plans should include commitment to advertising and inventory plus a controlled growth strategy to prevent the special finance department from outrunning its resources. Often times, departments fail because management did not properly plan for growth.

Select the best candidate

Special finance managers must be detail orientated, honest and possess great people skills.

Selecting and building relationships with lenders

Interview lenders to establish if the programs they offer will work for your dealership. Ask questions!! Do they have support staff if there are issues? What type of customer do they like? Is training offered to your staff for funding? How long have they been in business?

The dealership special finance department does not need 25 lenders. Three or four who offer different programs work better because as ratios such as look-to-book and funded-to-approved are tracked you will develop a solid relationship with each lender, and when problems arise it will be much easier to receive exceptions.

Credit interviews

My experience has proven that dealerships succeed when they conduct professional credit interviews with all special finance customers. This sets the foundation for higher credit approvals, better gross profits, satisfied customers who will refer others and loan packages that will be paid quickly by the lender!


Start slow, use small ads that attract the type of customer who can obtain financing. Engage the services of a professional loan-by-phone company. This is important because special finance consumers are often embarrassed to give credit information in person plus these companies allow you to receive calls 24/7 without employing additional staff. As your department grows and matures various forms of advertising can be implemented, including direct mail and electronic. Remember, your staff, lenders and inventory must be ready before engaging in a major advertising campaign.


Know your market! If the average customer in your market makes $1,500 per month then do not stock cars that will carry payments over $350. Stock good inventory with high book and term values that customers will want to purchase. Just because people have bad credit does not mean they will buy ugly or undesirable cars. They have more choices now than ever!


Use the “Dialing for Dollars Method” I have developed and written about so often. In other words call the references listed on each credit application and prospect for new customers. Special finance customers are loyal to dealerships that treat them properly and influence other customers who have fallen on hard times like themselves.


Track contracts in transit daily, train staff to assemble proper funding packages that will be paid quickly. Funding is the number one reason why dealership special finance departments fail. Ask your lender for a sample-funding package. Remember each one differs somewhat, and little things will hold up the dealerships money. When lenders call wanting additional stipulations make sure someone handles their request immediately.

Paul Snider is CEO of Credit IQ, parent company of VOISYS, which features Loan by Phone Products. He's served both the lending and dealer community in executive levels and is considered a “pioneer” of the subprime industry.

“What makes a dealer successful in the F&I department?

We asked our columnist Ron Martin, a dealership F&I sales veteran and author, what makes for a successful dealership F&I department.

Here's what he says:

  1. Thinking outside the box. In other words, not buying into the idea that having an aggressive selling F&I department somehow disrupts the sales department.

  2. Giving your F&I manager the same respect and compensation as any other manager at the dealership.

  3. Having the right people. Don't put a weak sales person in F&I. This person should be one of the best sales people in your organization.

  4. As a dealer, learn how the department works, so the right decisions can be made to complement F&I income and sales.