Empower F&I Managers to Take the Wheel

Dealers’ F&I managers can make it easier for retail sales to clear often over-stocked lots – if they have the support from dealership leaders.

It’s no surprise that many near- and non-prime consumers are at risk of being priced out of the automotive market. The solution? A bit of extra diligence by F&I managers.

“Non- and near-prime customers are today’s prime customers,” says Justin Gasman, a senior F&I trainer at Ron Reahard and Associates and a former dealership F&I director, referring to what he considers such groups’ unrecognized high status in the credit-rating hierarchy.  “Today’s credit scoring – which I take issue with – makes them look worse than they are. It’s not them; it’s the economy.”

He cites this example: An entrepreneur with a prime credit rating experiences a temporary slowdown in his or her business due to the economy. Consequently, the person uses home equity as a line of credit to offset a disrupted cash flow, which could lower the person’s credit score.

“There’s a big difference between a guy who is temporarily down on his luck because of life’s circumstances and a professional deadbeat who has no business being in a car dealership F&I office,” Gasman says.       

Kevin Filan, senior vice president of marketing for Open Lending, agrees, telling WardsAuto that there is more to non- and near-prime people’s borrowing potential than their credit scores reflect.

As we’ve reported, many dealers and lenders are using alternative data to work toward loan approvals for customers.

That’s one way F&I managers can secure better customer financing.

Near- and non-prime registrations declined 10% in 2023, while prime and super-prime stayed flat, according to a recent Open Lending report.

In 2019, near- and non-prime consumers represented 20% of new, just-registered vehicles. By the end of 2023, they represented 14%.

For used vehicles, near and non-prime consumers earlier represented 42% of the market. That decreased to 35% last year.

Monthly car payments for non-prime consumers averaged $782 for new vehicles, $547 for used and $631 for new-vehicle leases in the fourth quarter of last year., according to credit tracker Experian.

“The economy is slowly improving, but high vehicle prices and interest rates are putting lower-credit consumers in a tough position,” says Filan.

He says many lenders have become more risk-averse in recent years, shying away from anything but prime and super prime tiers. Also, lenders “have limited money to put into the marketplace.”

Consequently, “we’re seeing disproportionately higher charges” to people who are just below prime credit levels.

Open Lending uses an artificial-intelligence platform with proprietary and third-party data to identify creditworthy near- and non-prime consumers.

It provides lender clients with loan analytics, risk-based pricing and risk modeling, It also offers financial institutions loan-default insurance which Filan describes as “a backstop.”

Of course, resources are only as good as the partnerships between F&I managers and lenders.

“We’re partners with lenders, but you’ve got to know how to sell and work them,” Gasman adds. “A simple credit score is not enough. You have to tell a bank why someone’s score is a 660.”