Lender leverage is making a comeback.
Proponents say the practice helps get more deals financed by bringing lenders more volume aggregated from smaller dealers who are trying to get special financing for their customers.
Big stores have the volume to get non-captive lenders’ attention under such circumstances, but that’s not the case for smaller dealers, says Joel Ferrier, founder of Lucrum Dealer Solutions, a firm that offers services to the small guys.
“Volume is leverage, but odds are unless a dealer is sending a lot of deals to a non-captive, the supervisor or branch manager isn’t going to take a call or text on a Saturday afternoon about a marginal deal,” he says.
“But that banker might from us, because he knows we can influence 500 car deals with that bank. That’s lender leverage.”
Utilizing lender leverage, when rehashing deals with lenders, dealers hope to convince them of a customer’s credit worthiness.
This practice had traction prior to the recession and the demise of many banks and lenders. Ferrier and Managing Partner David Huff determined the time is right again for its reemergence.
Matthew Mulkey, manager of CRB (California Republic Bank) Auto’s Irvine, California Dealer Service Center, says Lucrum brings the bank 200 deals a month, compiled from several smaller dealerships.
“A dealer can make more profit on more deals,” Mulkey says of the aggregating of loan applications.
“In most cases, smaller stores send all their paper to one or two lenders so they have that leverage, but they may not have enough volume in subprime,” says F&I trainer Ron Reahard. “If the F&I manager won’t advocate for the customer no one else will.”
Ferrier agrees, but says the F&I office often is backed up, potentially has the wrong attitude about a customer or possibly isn’t willing to go to bat for a marginal customer if the bank has given a maximum call.
“We specialize in approved deals that are not maximized, meaning for a number of reasons F&I takes an average gross profit deal that actually has the possibility to make more for the dealership if it’s pushed with the lender,” Ferrier says.
“Bank computers look at predetermined parameters but we help them see that the customer is a good individual with a few hiccups, and work to give the customer the most advance possible to maximize profit for dealers.”
Doug Patterson, the finance director for a Texas dealership group, praises Ferrier’s tenacity.
“We had a deal in here just yesterday that every bank we went to turned it down,” Patterson says. “I called Joel and he made two calls.”
Those resulted in getting the deal turned around as well as financing that covered the purchase of F&I products, Patterson says.
