
PAYMENT
CALLS:
A payment call is an approved solution that a Non-Prime lender
offers to a customer. It is up to the Special Finance Manager to
calculate how much vehicle the payment call will advance. Let’s
look at an example:
Payment Call: $400 per month @ 21% for 60 months
Enter the term and interest rate in your computer and roll the
payment back to calculate the total amount that can be
financed.
Maximum amount financed = $14,750
Add the down
payment 2,500
Total
$17,250
Deduct
taxes $ 2,119
Deduct admin
fees 500
Deduct an
E.S.P. 1,500
Net Selling
Price $13,131
If the lender has an advance limit of 120% of Black Book’s ‘CLEAN”
value, then the vehicles that you pick out for the customer based
on their needs must fall within the maximum advance as calculated
by the payment call. Many of your existing vehicles that you have
in inventory will fall within the payment call parameters from your
non-prime lenders however, savvy Special Finance and Used Vehicle
Managers will seek to acquire inventory that satisfies customers’
needs and also ’book out’ well. Now go and find a vehicle in
your inventory that can be sold for that amount based on the
lender’s advance limits.
INVENTORY
Stocking inventory that meets with your lenders’ parameters will
be one of the greatest challenges that a Special Finance department
will encounter. There is a myth that non-prime deals involve
delivering cheap, older or higher mileage vehicles - this is far
from reality. You will find that the majority of your Special
Finance units are less than 4 years old with 60,000 km’s. Many new
vehicle franchises have allowed their used vehicle departments to
become “Almost New Vehicle Departments.” While many of your
Special Finance models will fall into this category, huge
opportunities lie with vehicles of older vintage and mileage.
Many new vehicle franchises have adopted “Certified Plus” marketing
strategies and have significantly reduced stocking older vehicles
with higher mileages because of the greater reconditioning costs.
This is generally an internal dealership policy issue that many
dealerships have addressed. Many dealerships will continue to
support their “Certified Plus” brand but will also stock older
vehicles that are certified and reconditioned but do not offer
extended warranties, exchange privileges and other value-added
features. These vehicles are made available to the Special Finance
department and a happy compromise is achieved. What we do hear
however, is Special Finance Managers complaining about their
inventory being sold by the sales consultants to regular prime
customers. There is obviously a lesson to be learned here.
“One man’s garbage is another man’s treasure.”
This holds true for the used vehicle marketplace as well. Too
many quality vehicles are wholesaled from new vehicle dealerships
today only to be purchased by independent used vehicle operators or
savvy used vehicle managers at new vehicle dealerships that will
eventually be sold to customers. Some of them will be sold to
Special Finance customers.
For more information about payment calls and inventory, contact Hector Bosotti, National Trainer & Consultant with Wye Managemenet. hbosotti@wyemanagement.com