F&I Management & Training

Do you know what your customers think they know?

Ahh the age old chestnut, you know what you know about finance and loans, but your customers tell you that they know what you know because they’ve ‘got the internet at home’

Let me tell you, the vast majority of your customers don’t have a clue about the difference between finance and a personal loan, the burning question is, do you?

I have spoken to a few sales execs in the last few days, and conducted my own straw poll based on the differences between finance and direct lending, and I have to tell you the results were totally unsurprising – the lack of knowledge in our own industry never ceases to amaze me.

Firstly, your customers are being educated by your competitors, the Banks and direct lenders. The common theme they use is that of APR. Honestly now, how many of you in the last month have had to counter and sell against an APR objection proffered by a customer? I suspect quite a few of you at the coal face would say yes, and its pretty bloody difficult to sell against when you’re on the back foot from the off.

The reason that your finance competitors educate customers to use APR is really simple; they know you can’t compete on rate. Ah well, might as well switch off the lights and go home eh?

NO.

Your F&I products are streets ahead of the generic, bland and flaccid loans that your customers are offered by the big boys in the high street, here’s why; 

APR: Finance APR is calculated after assessing all fees, charges, interest, admin & documentation costs that COULD be charged to the loan, IF the loan was to run, unblemished and on time every month without fail, until the LAST payment is made. The Banks APR only reflects the INTEREST levied on the amount of money borrowed, on an annualised basis. Hence the acronym – Annual Percentage Rate – what is annual about your APR’s?

We all know that a Finance APR incorporates the Maximum cost to the client – the direct lenders APR reflects the Minimum. We all knew that, we just didn’t know that we knew it.

SECURITY: We all know that personal loans are unsecured right ? WRONG.

Personal loans remain unsecured whilst repayments are made at the agreed amount on the agreed date, deviate from that schedule and the loan can be converted within minutes to being secured on your home, property or assets. FAIL to pay your ‘unsecured personal loan’ and your goods and chattels to the value of the outstanding loan plus any additional fees or disbursements (translation – massive profit opportunities) are forfeit.

Finance is secured on the car, fail to pay and we take the car, block it, redeem the loan from the proceeds that were the best that could be secured, and reschedule a loan to repay any outstanding balance.

UNDERWRITING: If your customers borrow £10k from the Bank, then they are the security on the loan; accordingly the principal sum borrowed plus interest will be listed on their credit report. Experian, Equifax, Call Credit, CDMS, and other credit bureaux will show this as them owing £14,000 to the direct lender, enough to scare off future sources of credit, as the balance often stays constant until the loan is repaid.

Finance houses do not as a rule show the balance, some may show the original loan amount, but most just record £250 per month going out of your clients bank, with a series of 0’s and 1’s for on-time or late payments.

So, by offering your clients secured finance on the vehicle, you are helping them preserve their credit rating for the next few years, absolutely critical for the future.

EARLY SETTLEMENT: We have all done it, some of us a million times, contacting a lender for an early settlement quote, and then it pops through the PC / Email / Fax / Local Rep, the customer owes us £xxxx, but for early settlement before such a date, we will accept the reduced figure of £xxx. Ahh, isn’t that nice of the Finance company to do that, knocking off the remaining interest from the loan as an incentive to repay early.

NO.

It is the law, they have to do it. The Law is the Consumer Credit Act, which clearly stipulates that in the event of a request for early settlement, all outstanding fees and charges be rebated off the agreement, as the client no longer wishes to borrow the money. This calculation used to be called the ‘rule of 78’, the new calculation method is Actuarial. The commercial reality is that you can ask your customers if they would like the remaining unpaid interest knocked of if they want to settle early, if they say yes, sell ‘em finance, because this protection does NOT COVER PERSONAL LOANS.

Please have a look back at the APR paragraph, does it make sense now?

Oh, one final point, a number of you may write to me, as has been done before, questioning my claim that the CCA doesn’t cover Personal Loans, so in anticipation ask yourselves the following questions,

Do PL documents claim to give coverage under the CCA ? (answer – yes )

Do Direct lenders take security in the asset?

Do Direct lenders need a dealer invoice?

Do Direct lenders offer halves and thirds?

Do you seriously believe that a Bank would give away loan profit on an early settlement if they don’t have to ?

The Banks wrote the Consumer Credit Act in 1974, it took 10 years to gain statute, it was a piece of regulation that they engineered to regulate all lenders but themselves, don’t you think that’s a little unfair ?

To close, give your customers the peace of mind that comes with a secured finance agreement, protect their rights, protect their credit ratings, guarantee them an early settlement for the future if they need it, and in doing all of these things for them, make additional profits for yourself and your dealership.

BUSINESS OWNERS & DIRECTORS; If you would like me to help your team make the most of every profit opportunity, please give me a call, or drop me a line, I guarantee to add value and confidence to your team, and I’m not as expensive as I appear.

DATED: 21.10.08

FEED: PTL