The F&I manager who understands the importance of good lender relations can make a difference of 10-20% more sales to a dealership. It only stands to reason that they can affect a dealership's sales in reverse if they don't network the lender community.

I often point out that since 80-90% of vehicle buyers are either financing or leasing, this part of the sales process is probably the most crucial. Having good lender relationships is just as important as selling the benefits of dealer financing to customers.

Selling paper to lenders has changed tremendously in the last five years. It used to be much more of a subjective process to sell the benefits of an application to a lender. You only needed to convince an individual loan officer of the merits of the deal.

Today it's much different.

One of the differences is that you not only need to change the mind of the lender, but also their “coach.” The coach is always there sitting next to the loan officer, saying, “This application isn't a good loan.” The coach I'm referring to is the credit score. The lender looks down at it while you're trying to point out the merits of the application. The credit score is constantly reinforcing their decision. The coach even tells the loan officer what interest rate the customer deserves.

We are in a constantly changing environment. The Internet will change the way we get deals approved in the future. Eventually the computer will make most all the decisions. Credit scoring modules will evolve to demographic/credit scoring statistical models. Scoring models give lenders what they seek most, i.e. objectivity, unbiased loan decisions, and low-cost decision-making.

The F&I professional recognizes the system they must work within now, and they are prepared to evolve with it as it changes.

Today's F&I person needs more than ever to be able to get inside the mind of the lender. They need to think like a conservative lender, but sell like an aggressive sales person. Our job in getting applications approved is to put the spot light on the positive attributes of our customer, at the same time recognizing the job of most lenders is to protect their banks assets through sound loans.

We accomplish this through five key points:

  1. What do lenders look for?

  2. Understand how to read a credit bureau as well as the lender does.

  3. Evaluate credit scoring for more than just the score itself.

  4. Gain leverage with lenders by promoting win-win relationships.

  5. Embrace the Internet for lenders as it evolves.

What do lenders look for?

If you want to be able to put the spot light on the positive attributes of an application you need to understand, what key traits a lender looks for to approve loans. These can vary in importance from lender to lender, but they are all working from a similar lesson plan. Some call these the three C's, credit, character, and capacity. The demographics that make up the three C's are:

  • Customer's credit
  • Debt to Income Ratio: percentage of debts to net income.
  • Time on their current job.
  • Time at their current residence.
  • Equity: cash or trade-in down payment.

How to read a credit bureau as well as the lender does

Understanding the basics aren't enough. We need to evaluate the tendencies of the customer payment history. How have they paid previous auto loans? Is a customer's slow payment history recent or past? What was the reasons for past credit problems? Have credit cards been managed well? Does their debt load include co-signed loans? Is lack of credit possibly the customer showing financial restraint? This short list just gets you started.

Sit down with someone well versed in credit information, such as your local credit bureau sales representative. Ask loan officers whom you do business with to explain to you what is important to them in evaluating a customer's credit.

Evaluate credit scoring for more than just the score itself

Lenders are quick to live by the sword, but not to die by the sword. They will categorically disqualify a customer for a loan for a 550 credit score, but will not approve a customer with a 700 score when their standards call for an approval. They know that credit scoring is objective, but is not without its flaws. We need to have that same knowledge.

Credit Scoring is a statistical module, evaluating millions of pieces of credit information. It is a system of scorecards that forecast what is the probability that the customer will repay their loan in a timely fashion. The score is a snapshot at a particular period in time, and therefore subject to change.

The statistical module gives you a number, usually between 450-850. The higher the number the more likely the customer will repay the loan. It also generates the four reasons codes, which I call objections, for why it scores a certain way.

If you want to learn more about credit scoring you can contact Fair Issac & Company who has developed most of the credit scoring models. I write about how to understand the scoring models better in my book, “The Vision of Finance and Insurance,” a training narrative.

Gain leverage with lenders by promoting win-win relationships

It doesn't matter what kind of relationship we're in, whether it's personal or business; if both parties aren't winning it is short-lived.

We want the lenders we work with to see us as important clients, and losing us would result in a hardship. This is when we have leverage. They will then be more aggressive at approving our deals, which gives us the edge for more money, a better tier, longer terms, or approving the marginal credit customers.

Some of the ways we can gain leverage:

  • Send the lender good performing loans. We will need to distribute our good customers to the lenders we want leverage with. How many? It depends on how many contracts you have per month. Remember, the lender needs to feel they are losing business if they don't work with us.

  • If you have a local lender that has conservative buying practices, don't waste their time with unnecessary credit applications. Use them for their customers, and then they won't perceive you as just using their time.

  • Develop a personal relationship with your lenders. It is much easier to say “yes” to a friend, than an acquaintance.

  • Make sure you are making “deposits” with a lender (good loans) before asking them for a “withdrawal” (exception to their loan policy).

Embrace the Internet

The Internet is the future of dealership financing. It will give us immediate approval and allow us to use lenders all over the country by simply pressing a few buttons. There are already many lenders offering immediate approval from their web site. Some are even joining forces.

The F&I professional who seeks out these opportunities rather that waiting for them to come will be out in front of their competition.


Ron Martin is the author of the book “The Vision of Finance and Insurance” and a national sales trainer and consultant. You can learn more about his company, The Vision of F&I, Inc., or order his book at www.thevisionoffandi.com