Accepting/providing finance pros and cons

[tradegirl 112]

What would you say are the pros and cons to provide or accepting finance?

I know Simon doesn't provide or accept finance and Nick does (I think)

What are your reasons why?

[SC Derby 259]

If you get a good finance company on your side (Close for me) then I really don't think there are any cons. 

Extra deals, commission and increased professionalism in the eyes of some customers.

[David Ayers 171]

Obviously depends on your stock profile.

Pro's...You sell more cars and earn commision.

Cons...I leave that to those who don't offer finance

Edited November 21, 2018 by David Ayers

[Nick M.K. 574]

Cons first:

1) You may spend an hour with a punter showing them a car and then they get rejected for finance. 

2) 20 more minutes added to the average deal compared to cash buying.

3) Several hours added to SOME deals where you have to propose your customer to several finance companies if they have an iffy credit score or missing documents.

4) Comeback. You can get comebacks from a finance company which is sometimes more difficult to deal with if you are not used to it. Legally though it's easier with a finance company than a private retail buyer. 

5) Zuto. Where do I even start. 

 

Now pros:

1) Money. Finance companies provide hefty commissions for our 10-20 minutes of work. So hefty in some cases that some dealers rely mainly on that income and have almost NO margin in the metal. 

2) Ease of transactions. You are giving an expensive car to someone that can't save the money to buy it. They are NOT fussy at all, no more huffing and puffing for minor scratch marks etc. Selling a 20K car on finance is much easier than selling a £999 old diesel estate to a cash buyer. 

3) Haggling. "What is your best price for cash?" I am sorry sir, we actually prefer buyers on finance because of the commissions. We can sell to you but only at the screen price. I hope you understand.

4) Stocking facility. A finance company that is happy with your volume will give you a very low interest stocking facility. This is sometimes cheaper than using your own money for stock. You can then grow much quicker. You need to know exactly what you are doing though. 

5) Comeback. Because acceptance is so important to some finance buyers they don't suffer so much from buyers remorse and are unlikely to come back for full refund. 

[tradegirl 112]

2 minutes ago, Nick M.K. said:

4) Comeback. You can get comebacks from a finance company which is sometimes more difficult to deal with if you are not used to it. Legally though it's easier with a finance company than a private retail buyer. 

Thank you for the answers guys.

Nick, what comeback do you mean?

[Nick M.K. 574]

When the car breaks and you sold it on finance the customer will complain straight to the finance company, not only to you. Finance company will then come back to you demanding you fix it. 

[CPM 0]

2 hours ago, Nick M.K. said:

Cons first:

1) You may spend an hour with a punter showing them a car and then they get rejected for finance. 

2) 20 more minutes added to the average deal compared to cash buying.

3) Several hours added to SOME deals where you have to propose your customer to several finance companies if they have an iffy credit score or missing documents.

4) Comeback. You can get comebacks from a finance company which is sometimes more difficult to deal with if you are not used to it. Legally though it's easier with a finance company than a private retail buyer. 

5) Zuto. Where do I even start. 

 

Now pros:

1) Money. Finance companies provide hefty commissions for our 10-20 minutes of work. So hefty in some cases that some dealers rely mainly on that income and have almost NO margin in the metal. 

2) Ease of transactions. You are giving an expensive car to someone that can't save the money to buy it. They are NOT fussy at all, no more huffing and puffing for minor scratch marks etc. Selling a 20K car on finance is much easier than selling a £999 old diesel estate to a cash buyer. 

3) Haggling. "What is your best price for cash?" I am sorry sir, we actually prefer buyers on finance because of the commissions. We can sell to you but only at the screen price. I hope you understand.

4) Stocking facility. A finance company that is happy with your volume will give you a very low interest stocking facility. This is sometimes cheaper than using your own money for stock. You can then grow much quicker. You need to know exactly what you are doing though. 

5) Comeback. Because acceptance is so important to some finance buyers they don't suffer so much from buyers remorse and are unlikely to come back for full refund. 

You won’t get a better than this ^^

i always ask if they’ve had finance before and make them apply before viewing the car to save wasted time 

[Nick M.K. 574]

33 minutes ago, CPM said:

i always ask if they’ve had finance before and make them apply before viewing the car to save wasted time 

I do that most of the time but sometimes the customers prefer to not have a search on their credit file unless they absolutely have to and are about to buy the car. Others have such a long list of cars ("I am thinking of an Audi, VW, Mercedes, Lexus or BMW but I might also consider a Range Rover Sport if the monthly payment is right") to look at that I'd rather not spend the 10 minutes proposing them until they tell me they want MY car and shake my hand on a deal. 

[David Ayers 171]

Don't Close do a soft search?

[Nick M.K. 574]

16 minutes ago, David Ayers said:

Don't Close do a soft search?

I think at proposal time they do a normal search but even with soft searches some customers just don't want them until the last minute. 

[NOACROSS 414]

We have a soft search button on the website (via iVendi) and auto propose etc.. so I rarely actually have to physically prop a punter myself.

Even when they are in front of me in the office, they do it themselves.

Quite often the first I know of their interest in the car is when I get an acceptance or decline email.  

If a decline it’s two secs to fire off to another lender.  

Not that we’re getting much finance business still though recently - as per an earlier thread. Maybe one or two a month, but I don’t have many late cars...

[Nick M.K. 574]

6 minutes ago, NOACROSS said:

We have a soft search button on the website (via iVendi)

Only Codeweavers systems can autoprop to Close Brothers. In any case I prefer to submit applications myself to make sure all details are correct. 

[stockedup! 63]

Just be sensible what you choose to finance, better to do it than not IMO, I don't do a lot but what I do makes a bit more money. I count it as a bonus.

 

[Blenheim Car Sales 111]

I am planning on going fully FCA accredited over Christmas break but do all finance houses actually need you to be FCA in order to let you sell there finance products ???

 

i am going FCA accredited purely to sell finance for additional income....................   broker i used this year  must have earned a tiny fortune from me

[MOTORS 25]

11 minutes ago, Blenheim Car Sales said:

I am planning on going fully FCA accredited over Christmas break but do all finance houses actually need you to be FCA in order to let you sell there finance products ???

 

i am going FCA accredited purely to sell finance for additional income....................   broker i used this year  must have earned a tiny fortune from me

Yes, you have to be FCA regulated to deal with any finance house. Don't forget to include debt adjusting.

[Rory RSC 596]

27 minutes ago, Nick M.K. said:

Only Codeweavers systems can autoprop to Close Brothers. In any case I prefer to submit applications myself to make sure all details are correct. 

Same here mate got to change unemployed for 3 years to worked at their nearest Tesco earning 100k a year right 

[Arfur Dealy 823]

5 hours ago, tradegirl said:

What would you say are the pros and cons to provide or accepting finance?

I know Simon doesn't provide or accept finance and Nick does (I think)

What are your reasons why?

TG, the reason I have chosen not to povide finance is because I specialise in higher mileage older prestige, plus I really don't like the idea of an a Finance Company bending over to a bully of a billy and demanding I refund them because they haven't got the balls to stand up to the billy.....

However, that doesn't mean you shouldn't. 

It also means I shouldn't, if I knew I would be dealing with a Finance Company who would stand by me then I might go for it....... I am thinking in changing my stock profile potentially slightly and might and I mean might be tempted to offer it..... 

[trade vet 702]

22 minutes ago, Blenheim Car Sales said:

I am planning on going fully FCA accredited over Christmas break but do all finance houses actually need you to be FCA in order to let you sell there finance products ???

 

i am going FCA accredited purely to sell finance for additional income....................   broker i used this year  must have earned a tiny fortune from me

The bottom line is that prime lenders will want regular volume business and probably to fund you aswell..I am told that it is no longer viable for them to service small dealers.Just get commission from your broker who I doubt will have made a fortune from you this year unless you are doing north of 500k.The good’ chucky commission ‘ years are long gone.

 

[Nick M.K. 574]

Just now, trade vet said:

I am told that it is no longer viable for them to service small dealers

I am one of the smallest dealers on this forum and the three finance companies I work with (Close, Blue & First Response) are quite happy with me.

If anything it is actually getting easier to "get in bed" with a finance company due to the very big players in the market getting bigger and the smaller players getting much more flexible and accommodating.

[Arfur Dealy 823]

2 minutes ago, Nick M.K. said:

I am one of the smallest dealers on this forum and the three finance companies I work with (Close, Blue & First Response) are quite happy with me.

If anything it is actually getting easier to "get in bed" with a finance company due to the very big players in the market getting bigger and the smaller players getting much more flexible and accommodating.

Nik, can you indicate an idea of expected commission ?

Oh and the number you do monthly ?

[grant8064 219]

2 minutes ago, trade vet said:

The bottom line is that prime lenders will want regular volume business and probably to fund you aswell..I am told that it is no longer viable for them to service small dealers.Just get commission from your broker who I doubt will have made a fortune from you this year unless you are doing north of 500k.The good’ chucky commission ‘ years are long gone.

 

Whoever told you that isn't correct.

We use a few different firms and have never taken funding, they ask but don't push it or make it a condition of their lending.

One we use we give max 100K of business to per year, 10% of balance comms are still there and they're very happy we use them when we do. 6k balance = £620 comms this week.

We're a small dealer and have two or three finance reps a week visiting touting for business.

The real bottom line, IMO, is that they're business that need people to use their services. They're hungry for dealers....almost as hungry for business as the card machine reps!

 

FWIW - Everything Nick said i'd 'Like' if I had the button.

Know what you're responsibilities are to both punter and lender before getting involved and read and understand the FCA guidelines.

Make sure your cars are 100% before handover, four years and hundreds of deals in and we've never had a charge back or complaint from a finance company because we spend on prep. You can't predict the future but you can buy carefully, prep well and test drive everything yourself prior to handover.

Make sure your stock is 'finance worthy'...for example 100k+ German stuff is asking for trouble.

Get a good rep, you don't have to like them but know a good one when you find them.

 

Finally, and it's personal opinion, don't be morally corrupt. We've all met or heard about punters sewn into a shed at Moneybarn 49.9% apr that doesn't suit their needs. Understand that when someone takes on a loan that they might be paying back for five years it'll affect their lives. Don't stitch people up basically.

[Nick M.K. 574]

11 minutes ago, Arfur Dealy said:

Nik, can you indicate an idea of expected commission ?

The highest I've heard is 11% on an independent dealership with 200+ cars. 6-7% is more realistic for a small dealer, slightly more from Blue. I do 2-3 deals a month (13 stock) but I've also had months with 7 on finance and months with none. 

[Arfur Dealy 823]

Just now, Nick M.K. said:

The highest I've heard is 11% on an independent dealership with 200+ cars. 6-7% is more realistic for a small dealer, slightly more from Blue. I do 2-3 deals a month (13 stock) but I've also had months with 7 on finance and months with none. 

So it that 6/7%c of the amount of interest on the finance, how does it work ?

[Nick M.K. 574]

No. You sell a £7000 car with £1000 cash deposit, you get the commission on the £6000 that were financed so £360 in this example assuming 6% comm. You get a cheque in the post at the end of the month or an immediate bank transfer if it's Blue. 

[Arfur Dealy 823]

3 minutes ago, Nick M.K. said:

No. You sell a £7000 car with £1000 cash deposit, you get the commission on the £6000 that were financed so £360 in this example assuming 6% comm. You get a cheque in the post at the end of the month or an immediate bank transfer if it's Blue. 

Cheers.... How does VAT work with the example of £360 ? 

I mean does the £360 include VAT ?