Dealer Finance Training
July 22, 2020
1:00pm EST
NMEDA Education & Training
Finance Series Curriculum
• Finance 1.0 Intro to Finance
• Finance 2.0 Sales and Finance
• Finance 3.0 Compliance
Learning Objectives:
– 1.0: Develop an understanding of the most common terms related to
Automotive Finance.
– 2.0: Apply that understanding to your sales process to ensure a higher
probability of success rate in getting a consumer financed.
– 3.0: Establish a compliance procedure at your dealership to protect you
and your consumers.
Presenters
Juan A . C ollazo
Director of Organizational Development
MobilityWorks
18 years Automotive & Mobility Sales Experience
Cassy Churchill
Dealer Development
BraunAbility
18 Years Mobility Dealership Experience
D avid Yount
Finance Director
Brandl Mobility Finance
12 Years Mobility Finance Experience
Finance 1.0: Agenda
• Credit Application
Information
• Participants in Lending
Activity
• Financial Challenges
• Income Criteria
• Important Terms
Finance 1.0: Credit Application
Necessary Information
• Full Name and Date of Birth
• Social Security Number (Tax ID)
• Address – Rent, Own, Length of Time
• Employment
• Gross Income
• Other Income
• Co-Applicant
• Signature
Case Study:
Loan Participants
Signer/
Primary Borrower
When only one person is applying for financing, they are the primary
borrower.
Where there is more than one person applying, the primary borrower may
be determined by whoever has the higher income.
Co-Signer/
Co-Borrower
The co-borrower is the person who agrees to go on loan with the primary
borrower.
A cosigner is often needed if the primary applicant
has credit or income challenges.
Finance Challenges
Finance Challenges
• Legal proceeding customers
initiate - to help them sort out
not being able meet their
financial obligations.
Finance Challenges
Charge-Off
• Defaulted Loan
• Unlikely to Be Collected
• Remains on Credit Many Years
Finance Challenges
Collections
• Similar to Chargeoffs
• Lowers Credit Scores
Finance Challenges
• Collections that are the result of
unpaid MEDICAL bills.
• Not viewed as harshly as other, non-
medical collections.
Medical Collections
Income Terms
Debt to Income (DTI)
• Monthly outgoing payments in
relation to your income.
• Under 50% Is Ideal
• More Income $$$ = Lower DTI
Income Terms
Payment to Income (PTI)
• How much can the customer afford?
• Calculation to Determine Auto
Payment
• Current Bills + New Auto Payment vs.
Income
Additional Terms
Simple Interest Loan
Prepayment Penalty
Finance 2.0: Sales and Finance
• Establish whether a client is paying cash or finance
• Recognize when you have a subprime credit client
• Act accordingly and set the requirements for lender approval
• Down payment
• Backing into a payment
• Work with your GM/Finance Manager on the right inventory and LTV structure
• Perform taking a proper credit application and asking for stips
• Perform a credit investigation
• How to take the client out of the market and close the deal on approved credit monthly
payments
UNDERSTANDING CREDIT SCORES
SUB
PRIME
Subprim e
• If a client says anything less than
excellent for credit qualification
question, we need to pull the
credit report ASAP.
• “Ok, no problem. The first thing we
need to do is start with a credit
application. Once we evaluate your
credit, together we will find you the
perfect solution. One that is good
for your needs, your lifestyle and
ultimately your budget. So let’s go
ahead and get started.”
Finance 2.0 Sales and Finance
• (1st close) Getting a client to
run a credit application, have the
application ready with the Need
Analysis, and privacy notice
stapled together.
• Attention to detail, You take the
application.
• Credit Investigation
• It’s a closing tool.
That’s great that you're
able to pay cash. Now is
that coming in the form
of greenbacks from
under the mattress or
will you be writing a
check out of the savings
account?
Are they really paying
Cash? Or is it a local
credit union or bank?
We must capture
financing and offer a
comparison when
possible. Sell Financing
Third party funding?
WHERES THE CASH
COMING FROM
Finance 2.0 Sales and Finance
To put together, close, and fund a subprime car deal you need
accurate information. The best way to gather accurate
information is to conduct a thorough customer interview during
the auto loan application using open ended questions.
Credit Interview
Are we using a payment calculator and a
tiered rate to work into the payment?
Backing into the Payment
Current proof of income, proof or residency,
30 days current, confirm the math, gross vs
net, bank statements.
Collect Stipulations (Stips)
Book sheet (Inventory Value)
The value of a used auto in a specific market area. A recognized wholesale appraisal
guidebook provides guidance on the auto's value at any given time. Examples of these
guidebooks include Black Book, Kelley Blue Book, or NADA Guides & conversion value.
Finance 2.0 Sales and Finance
CREDIT WORTHINESS Similar Auto Trade,
what’s the amount of the
current loan
WHAT LENDERS LOOK AT
Minimum 15% - 20 %
down of total amount
financed
Finance 2.0 Sales and Finance
NEGATIVE EQUITY
I’M UNDER WATER, OWES MORE
ON THE VEHICLE THAN ITS
ACTUAL CASH VALUE
CORRECT INVENTORY, BOOK
VALUE, LTV, MONEY DOWN!
Finance 2.0 Sales and Finance
Finance 2.0 Sales and Finance
• Structuring a deal for lender
approval
• Model year and miles
• Debt to Income
• Payment to Income
• What vehicle will work?
• Know your lender programs
• Backing into a payment, give
multiple options on approved
credit O.A.C.
L
PLANTING THE SEED
Planting Seeds early on
During a test drive, ask they
client if they know about the
warranty the vehicle comes
with
Ask them to remind you later
how they can have complete
piece of mind while they own
the vehicle.
Remind client that the
proposal will include options
for protecting their
investment.
FINANCE PROTECTIONS
TOTAL 40%
Finance 2.0 Sales and Finance
TAKE AWAYS
Check in with Management
A
Properly Structure a deal based on vehicles that
will get lender approved
B
Present a proposal on approved credit (OAC)
payment and close the deal! Set expectation for
communication with Finance for final approval.
D
Back into a payments that work for clients budget
C
Finance 2.0 Sales and Finance
THE END
QUESTIONS?
Check in with Management
A
B
Present a proposal on approved credit (OAC)
payment and close the deal! Set expectation for
communication with Finance for final approval.
D
C
Finance 2.0 Sales and Finance
Finance 3.0: Compliance
A comprehensive Audit of Finance
Department and Finance Manager
practices including deal jacket
examination. Detailed action plan to
comply with Federal and State
Regulations.
*NMEDA or presenters to not claim to be compliance officers, nor is this an all-encompassing
list or presentation. This presentation is for informational purposes only and does not provide
legal advise.
What is F & I Compliance?
Compliance: What should you do?
• Develop a program to assess your
complete Dealership Compliance
• Appoint someone to evaluate routinely,
including regulatory knowledge
• Educate the staff on compliance
procedures
• Reach out to third party for compliance
review
• Prepare and file required documents
What should you do?
Compliance: F & I Department
Federal Rules and Regulations:
Gramm-Leach-Bliley Act (GLB Act): Car dealers must protect
consumers’ privacy and sensitive data that they collect such as
names, Social Security numbers, and credit card or bank account
information.
CAN-SPAM Act: Prohibits misleading or false statements in emails
sent by dealership. Must provide valid physical postal address and a
way to opt out of emails.
Compliance: F&I Department
Truth in Lending Act (TILA) Reg Z: Governs how auto loans and
leases are advertised. You must be upfront and disclose all terms
of loans to potential borrowers including, but not limited to: Interest
Rates, Applicable fees.
Equal Credit Opportunity Act (ECOA): Prohibits discrimination in
credit transactions on the basis of applicant’s race, sex, color,
marital status, religion, national origin, age, and public-assistance
status.
Compliance: F&I Department
Risk-Based Pricing Rule: Gives most consumers information about
their credit scores when they apply for financing. Compliance by
providing Credit Score Disclosure Notice.
Fair Credit Reporting Act (FCRA): Obligates car dealers to protect
customers’ credit information and holds them accountable for the
accuracy of that information.
Compliance: Resources
Federal Trade Commission
Washington, DC 20580
877-FTC-HELP (382-4357)
www.ftc.gov
Federal Reserve System
Washington, DC 20551
888-851-1920
www.federalreserve.gov
Consumer Financial Protection Bureau
Washington, DC 20220
855-411-2372
www.consumerfinance.gov
State Laws
Your state’s laws may provide you with
additional rights. For more
information, contact your local
consumer protection agency
(www.consumeraction.gov)
or Attorney General’s office
(www.naag.org).
Questions???
